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S. HRG. 112–471

UKRAINE AT A CROSSROADS: WHAT’S AT STAKE

FOR THE U.S. AND EUROPE?

HEARING

BEFORE THE

SUBCOMMITTEE ON EUROPEAN AFFAIRS

OF THE

COMMITTEE ON FOREIGN RELATIONS 

UNITED STATES SENATE

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

FEBRUARY 1, 2012

Printed for the use of the Committee on Foreign Relations

(

Available via the World Wide Web: http://www.gpo.gov/fdsys/

COMMITTEE ON FOREIGN RELATIONS

JOHN F. KERRY, Massachusetts, Chairman

BARBARA BOXER, California 

ROBERT MENENDEZ, New Jersey 

BENJAMIN L. CARDIN, Maryland 

ROBERT P. CASEY, JR., Pennsylvania 

JIM WEBB, Virginia 

JEANNE SHAHEEN, New Hampshire 

CHRISTOPHER A. COONS, Delaware 

RICHARD J. DURBIN, Illinois 

TOM UDALL, New Mexico 

RICHARD G. LUGAR, Indiana 

BOB CORKER, Tennessee 

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

JAMES M. INHOFE, Oklahoma 

JIM DEMINT, South Carolina 

JOHNNY ISAKSON, Georgia 

JOHN BARRASSO, Wyoming 

MIKE LEE, Utah 

WILLIAM C. DANVERS, Staff Director

KENNETH A. MYERS, JR., Republican Staff Director

——————

SUBCOMMITTEE ON EUROPEAN AFFAIRS

JEANNE SHAHEEN, New Hampshire, Chairman

BENJAMIN L. CARDIN, Maryland 

ROBERT P. CASEY, JR., Pennsylvania 

JIM WEBB, Virginia 

RICHARD J. DURBIN, Illinois 

JOHN BARRASSO, Wyoming 

JAMES E. RISCH, Idaho 

BOB CORKER, Tennessee 

JIM DEMINT, South Carolina 

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C O N T E N T S 

Page

Barrasso, Hon. John, U.S. from Wyoming, opening statement ........................... 3

Tymoshenko Carr, Eugenia, Kiev, Ukraine ........................................................... 34

Prepared statement .......................................................................................... 38

Chow, Edward C., senior fellow, Energy and National Security Program, 

Center for Strategic and International Studies, Washington, DC ................... 18

Prepared statement .......................................................................................... 21

Piper, Hon. Steven, senior fellow, Foreign Policy, Center on United States 

and Europe, Brookings Institution, Washington, DC ....................................... 4

Prepared statement .......................................................................................... 6

Shaheen, Hon. Jeanne, U.S. Senator from New Hampshire, opening statement ...................................................................................................................... 1

Wilson, Damon M., executive vice president, Atlantic Council, Washington, 

DC .......................................................................................................................... 12

Prepared statement .......................................................................................... 15

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Johns Hopkins Center for Transatlantic Relations Report ‘‘Towards an Open 

Ukraine: Policy Recommendations’’ .................................................................... 44

Letter from Ambassador Alexander Motsyk, Embassy of Ukraine, Washington, DC .................................................................................................................. 53

(III)

(1)

UKRAINE AT A CROSSROADS: WHAT’S AT 

STAKE FOR THE U.S. AND EUROPE? 

WEDNESDAY, FEBRUARY 1, 2012 

U.S. SENATE, SUBCOMMITTEE ON EUROPEAN AFFAIRS, COMMITTEE ON FOREIGN RELATIONS, Washington, DC. 

The subcommittee met, pursuant to notice, at 2:35 p.m., in room 

SD–419, Dirksen Senate Office Building, Hon. Jeanne Shaheen 

(chairman of the subcommittee) presiding. 

Present: Senators Shaheen, Menendez, Barrasso, and Risch. 

OPENING STATEMENT OF HON. JEANNE SHAHEEN,

U.S. SENATOR FROM NEW HAMPSHIRE 

Senator SHAHEEN. Good afternoon, everyone. Thank you for joining us. 

The Senate Foreign Relations Subcommittee on Europe meets 

today to examine the current situation in Ukraine and to evaluate 

what is at stake for the United States and our transatlantic allies. 

I want to thank the witnesses who are here to help us sort 

through these difficult issues. We look forward to your testimony 

today. 

I am pleased to be joined by the subcommittee’s ranking member, 

Senator John Barrasso from Wyoming. 

As one of the largest and most strategically located countries in 

Europe, Ukraine literally and figuratively lies at the crossroads between Europe and Russia. Its importance as an energy transit 

state and as a force in the vital Black Sea region has made the 

country a unique and critical player in Euro-Atlantic economic, energy, and security considerations. In addition, the country’s ongoing 

transition from a Soviet Republic to a market-based democratic 

system makes Ukraine an important test case for reform in this 

part of the world. 

Obviously the people of Ukraine will have the final say on the 

future of their country; however, we are here today because the 

path Ukraine ultimately chooses is important to the United States 

and our European allies. As a result, the United States and Europe 

must play a more aggressive role in encouraging Ukraine to continue down the path to reform. 

Last year marked the 20th anniversary of Ukraine’s independence from the Soviet Union, and over the course of the last two decades, we have seen some important progress in Ukraine. 

On the security front, Ukraine made a courageous decision to 

voluntarily give up its nuclear arsenal in 1996, and today it conVerDate 0ct 09 2002 13:46 Jul 26, 2012 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\HEARIN~1\112THC~2\2012IS~1\020112-A.TXT BETTY
2

tinues to lead in nonproliferation efforts around the globe, committing to eliminate all of its highly enriched uranium by the spring 

of 2012. In addition, the United States relationship with Ukraine 

has evolved positively since 1991, culminating in a strategic partnership initiated in 2008. We have seen progress on political reforms and democratization in some areas, including open elections 

and free media. 

Unfortunately, despite some movement forward, Ukraine is severely lagging on a number of its own initiatives, and it continues 

to slip backward on its democratic and economic reform agenda. 

It has been 2 years since Viktor Yanukovych returned to power 

following the 2010 Presidential campaign in Ukraine. Elected in 

what was considered by outside observers to be a relatively free 

and fair election, Yanukovych had the legitimacy and mandate to 

continue moving Ukraine toward a modern, independent, and market-oriented future. However, Ukraine under Mr. Yanukovych has 

seen a significant slide on critical issues, including democratic reform, media independence, election standards, rule of law, and economic issues. 

According to the Wall Street Journal, Ukraine ranks 163rd out 

of 179 countries in terms of economic freedom. That puts them 

dead last in Europe behind Belarus and Russia. Last year’s annual 

Freedom House Report found that Ukraine suffered the steepest 

decline in democracy of any major nation in the last 2 years. That 

report cited antidemocratic tactics, politicized courts, a media 

crackdown, and the illegitimate use of force in the country. 

Perhaps of most concern for the international community is the 

case of former Prime Minister Yulia Tymoshenko. Her continued 

imprisonment on dubious, politically motivated charges is unacceptable and antithetical to a free and open system. The decision 

to move her to a prison outside of Kiev and her continued lack of 

appropriate medical care adds to our concerns. 

Her case shows the pervasive lack of rule of law, a corrupted 

judicial process, and selective persecution of political opposition 

leaders. Politically motivated trials and further abuses will isolate 

Ukraine, undermine its independence from Russia, make it difficult 

to attract outside investment, and will further hurt the country’s 

struggling economy. We have already seen a major free trade 

agreement with the European Union held up over the Tymoshenko 

case. 

So let us be clear, or let me be clear at least. It will be difficult, 

if not impossible, for Ukraine to deepen relations with the West 

while Ms. Tymoshenko remains behind bars. She should be 

released. 

Today the people of Ukraine and its leadership face a critical 

choice about its future path. We all share an interest in an open, 

independent, and successful Ukraine that is accountable to its people, and we all have a responsibility to help the country reach that 

important goal. I look forward to hearing from our witnesses today 

and to learn their ideas and suggestions for accomplishing this 

important objective. 

I am going to turn it over to Senator Barrasso before I introduce 

our witnesses. 

3

OPENING STATEMENT OF HON. JOHN BARRASSO,

U.S. SENATOR FROM WYOMING 

Senator BARRASSO. Thank you very much, Madam Chairman, 

and I want to thank you for holding this hearing today. 

I would like to also welcome all of our witnesses. We appreciate 

you appearing here today before this subcommittee to evaluate the 

current political and economic environment in Ukraine. 

It is important for Congress to carefully examine what is happening in Ukraine and understand the implications that it has on 

our strategic policy objectives. Ukraine is a large nation both in its 

size and in its population. It is located in a geographically important area between Russia and the countries in the European 

Union. 

In August of last year, Ukraine celebrated its 20th anniversary 

of independence. The United States has worked closely with 

Ukraine over the years on a variety of important issues. Our 

Nation wants to see Ukraine become an example for the region, as 

a strong, thriving, and democratic nation. 

During the last 20 years, there has been a lot of progress taking 

place in Ukraine. However, recent events have raised serious concerns about the future of democracy and the rule of law in Ukraine. 

I am concerned about the conviction of the former Prime Minister. 

The Government of Ukraine has been engaging in what many people view as selective prosecution against opposition party figures. 

I believe that politically motivated prosecutions significantly undercut the values of democracy. The United States believes it is the 

fundamental importance of democracy. Our Nation has also been a 

strong advocate for rule of law and an independent judiciary. 

I hope the Government of Ukraine takes action to prevent the 

backsliding and the erosion of democracy currently taking place in 

Ukraine. With parliamentary elections occurring in October, the 

international community is going to be carefully watching to assess 

the country’s true commitment to a fair, open, and transparent 

election process. The actions and policies of the Government of 

Ukraine have a significant impact on the relationship between our 

two countries. Ukraine needs to support the values of democracy. 

The government should work on tackling corruption and providing 

conditions for a flourishing market economy. I also hope Ukraine 

continues to pursue meaningful steps toward European integration. 

I look forward to hearing the testimony of our witnesses on these 

important issues. 

And with that, thank you very much again, Madam Chairman. 

Senator SHAHEEN. Thank you, Senator Barrasso. 

We have two panels this afternoon. On our first panel, we have 

Ambassador Steven Pifer who is currently a senior fellow for 

Foreign Policy at the Brookings Center on the United States and 

Europe and a former U.S. Ambassador to the Ukraine. Thank you 

for being here. 

Next we have Damon Wilson, who is the executive vice president 

of the Atlantic Council and a senior advisor to the U.S.-Ukraine 

Business Council. Welcome. 

And we have Edward Chow, a senior fellow of Energy and 

National Security at the Center for Strategic and International 

Studies. 

4

We are delighted to have all of you here. And let me just recognize the final witness who will be on the second panel today. I 

want to take this opportunity to recognize Ms. Eugenia Tymoshenko, and I will reserve your introduction for the second panel. 

Thank you. 

And I believe we also have the Ukrainian Ambassador here, 

though I am not sure where he is. Thank you. Welcome. 

So, Ambassador Pifer, if you would like to begin. 

STATEMENT OF HON. STEVEN PIFER, SENIOR FELLOW, FOREIGN POLICY, CENTER ON UNITED STATES AND EUROPE, 

BROOKINGS INSTITUTION, WASHINGTON, DC 

Ambassador PIFER. Thank you. Madam Chairwoman, Senator 

Barrasso, thank you for the opportunity to appear today to talk 

about developments in Ukraine and the implications for U.S. policy 

and U.S. policy goals in Europe. 

With your permission, I will submit a written statement for the 

record. 

The 2 years since Viktor Yanukovych became President of 

Ukraine have meant significant changes for the country’s foreign 

and domestic policies. President Yanukovych made the first foreign 

policy priority repairing what he regarded as Ukraine’s badly 

frayed relationship with Russia. He quickly agreed to extend

the presence of the Black Sea fleet in Crimea in return for a reduction in the price that Ukraine paid Russia for natural gas. He 

ended a number of other policies pursued by his predecessor Viktor 

Yushchenko that had angered Moscow. 

At the same time, the Yanukovych government indicated that 

Ukraine would seek a balance between its relationship with the 

West, particularly the European Union, and that with Russia. This 

seemed a sensible course for Ukraine in its current circumstances. 

Kiev began serious work to complete an association agreement and 

free trade arrangement with the European Union. 

Regrettably, however, the first 2 years of the Yanukovych Presidency have also seen a significant regression in democratic practices in Ukraine. This includes inappropriate activities by the Security Service of Ukraine, a questionable constitutional change by the 

constitutional court that increased the power of the Presidency, 

flawed nationwide local elections, and the arrest and trial of opposition figures, including former Prime Minister Tymoshenko, on 

what appear to be politically motivated charges. This democratic 

regression is unfortunate for the Ukrainian people and for their 

ability to enjoy a full and open democracy. It also hinders President 

Yanukovych’s professed goal of achieving a balanced foreign policy 

as it has resulted in a cooling of Ukraine’s relations with the European Union and the United States. EU officials have indicated, for 

example, that signature and ratification of an EU-Ukraine association agreement, which is now complete, depends on Ms. Tymoshenko’s situation. This undermines Ukraine’s relations with the 

West, and it will leave Kiev in a weaker position vis-a-vis Russia. 

This raises the question of what Washington should do. It 

remains in the United States interest that Ukraine develop as

a stable, independent, democratic state with a market economy, 

increasingly integrated into Europe and institutions such as the 

5

European Union. That kind of Ukraine promotes the United States 

objective of a wider, more stable, and secure Europe. Democratic 

regression within Ukraine, however, takes Ukraine in the wrong 

direction. 

The United States and Europe cannot ignore this. The U.S. Government’s priority with Ukraine now should be to encourage the 

Ukrainian Government to make the right choices regarding the 

country’s democratic development. This means releasing Ms. 

Tymoshenko and allowing her to return to normal political life. It 

also means that the Ukrainian Government should end its manipulation of the judicial system against other members of the opposition. It should rein in agencies such as the Security Service of 

Ukraine, and it should work with a broad political spectrum to ensure that the upcoming parliamentary elections this autumn are 

free, fair, and competitive. 

To promote this objective, the U.S. Government should, first of 

all, continue to underscore to Kiev U.S. concern about democratic 

regression and continue to remind the Ukrainian leadership that 

its internal political policies have a negative impact on its relationships with the United States and the West. U.S. officials should 

reiterate these points at every opportunity, including when Senate 

and congressional delegations visit Ukraine. 

Second, the United States should keep the door open for a more 

positive relationship with Ukraine should Kiev heed the message 

on democracy. A Ukraine that returns to the democratic path 

should be fully welcome in the European and transatlantic communities. 

Third, the U.S. Government should coordinate closely with the 

European Union so as to maximize the impact of Western policy on 

decisions by Mr. Yanukovych and the Ukrainian leadership. It is 

especially useful for Washington to coordinate with the European 

Union now as the European Union may be better placed to influence thinking in Kiev. 

What do these policies mean in practice? As one example, Mr. 

Yanukovych would dearly appreciate an invitation to the White 

House or an opportunity to host President Obama in Ukraine. The 

U.S. Government and European Union should continue what appears to be a de facto policy of minimizing high-level meetings with 

Mr. Yanukovych. U.S. officials should make clear to their Ukrainian counterparts that as long as Kiev imprisons opposition leaders 

and regresses on democracy, no meetings at the highest level will 

be possible. 

This approach does not mean freezing ties across the board. Normal diplomatic interaction should continue at most levels. The U.S. 

Government should carefully consider the assistance funding priorities it has. United States programs should aim to sustain civil 

society in Ukraine, which has made dramatic gains over the past 

20 years. In this context, exchange programs that bring Ukrainians 

to the United States and Europe can play a major role. 

It may be time for the United States and the European Union 

to consult as to whether it is appropriate to consider lists of 

Ukrainians who would be denied visas to visit the United States 

and EU member states. Even the threat of this could have a powerful effect on Mr. Yanukovych and the elite around him. 

6

Some Ukrainian officials likely will warn that this kind of approach by the United States and the European Union will cause 

Ukraine’s leadership to turn toward Russia. Western officials 

should not be taken in by this. If Ukraine truly wants to join 

Europe, then its leadership must accept the democratic values that 

prevail in Europe. If the leadership is not prepared to accept such 

values, then how can Europe and the West integrate Ukraine? 

Moreover, Kiev does not wish to fall too closely into Moscow’s 

orbit. President Yanukovych does not want to compromise 

Ukraine’s sovereignty. He wants to be the leader of a fully independent state. The Ukrainian elite and public likewise overwhelmingly support an independent and sovereign Ukraine. 

Madam Chairwoman, the overall goal of U.S. and EU policy now 

should be to crystallize in Mr. Yanukovych’s mind the following 

choice. He can have a more authoritarian political system, more 

difficult relations with the West and a greatly weakened position 

when he deals with Moscow, or he can return to a more democratic 

approach and have a stronger relationship with the West and a 

balanced foreign policy. In the end, I believe Mr. Yanukovych has 

reasons to opt for the latter course. The West should face him with 

that choice as clearly as possible. 

Thank you for your attention. 

[The prepared statement of Ambassador Pifer follows:

PREPARED STATEMENT OF STEVEN PIFER

INTRODUCTION

Madam Chairwoman, Senator Barrasso, distinguished members of the committee, 

thank you for the opportunity to appear today to testify on developments in Ukraine 

and the implications for U.S. policy and U.S. policy goals in Europe. 

When Victor Yanukovych became President of Ukraine in February 2010, his first 

foreign policy priority was to repair what he regarded to be Ukraine’s badly frayed 

relationship with Russia. At the same time, his government indicated that Ukraine 

would seek a balance between its relationship with the West—particularly the European Union—and that with Russia. This seemed a sensible course for Ukraine in 

its current circumstances. 

Regrettably, the first 2 years of President Yanukovych’s tenure in office have seen 

a significant regression in democratic practices within Ukraine. That is unfortunate 

for the Ukrainian people, and it is blocking the strengthening of Ukraine’s relations 

with the European Union and the United States. EU officials have made clear, for 

example, that the signature of an EU association agreement with Ukraine depends 

on Kyiv taking certain steps, such as releasing former Prime Minister Tymoshenko 

from prison. 

Mr. Yanukovych’s domestic policies are seriously undermining his ability to balance Ukraine’s relationships between the West and Russia. That will complicate 

Ukrainian foreign policy, leaving it less connected to Europe and in a weaker position to deal with Russia on issues where Ukrainian and Russian interests do not 

coincide. 

It remains in the U.S. interest that Ukraine develop as a stable, independent, 

democratic, market-oriented state increasingly integrated into Europe and institutions such as the European Union. That kind of Ukraine promotes the U.S. objective 

of a wider, more stable and secure Europe. Democratic regression within Ukraine, 

however, impedes that country’s ability to draw closer to the West. 

The U.S. Government should continue to underscore to Kyiv U.S. concerns about 

democratic backsliding and remind the Ukrainian leadership that its internal political policies have a significant impact on its relationships with the United States 

and Europe; keep the door open for a more positive relationship with Ukraine 

should Kyiv heed the message on democracy; and coordinate closely with the European Union to maximize the impact of Western policy on decisions by Mr. 

Yanukovych and the Ukrainian leadership. 

While engaging Ukraine at most diplomatic levels, the United States and European Union should continue what appears to be a de facto policy of minimizing highVerDate 0ct 09 2002 13:46 Jul 26, 2012 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6621 S:\HEARIN~1\112THC~2\2012IS~1\020112-A.TXT BETTY
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level contact with Mr. Yanukovych until he alters his internal political policies. The 

West should seek to crystallize in Mr. Yanukovych’s mind the choice between a 

more authoritarian political system and a strong relationship with the West, and 

make clear that he cannot have both. 

UKRAINE’S FOREIGN POLICY—A HISTORY OF BALANCE

Developing an independent foreign policy has posed one of the key challenges for 

Kyiv since the collapse of the Soviet Union in 1991. Ukrainian Presidents have generally sought a balance in their foreign policy relationships between the West and 

Russia. Europe and the West are attractive to many Ukrainians. Ukraine ought to 

be able to develop stronger relations with the European and trans-Atlantic communities without rupturing relations with Russia, which are also important to many 

in Ukraine. 

Given the large space that Russia occupies on Ukraine’s border, the long, complex 

history between the two countries, cultural links between Ukrainians and Russians, 

and economic ties that have continued since the end of the Soviet era, it is natural 

that Ukraine seek a stable relationship with Russia. At the same time, Russia is 

not the easiest of neighbors. Ukrainian Presidents thus have sought to develop relationships with the United States, Europe and institutions such as NATO and the 

European Union. Ukraine’s leaders have been motivated in part by a desire to gain 

greater freedom of maneuver vis-a-vis Russia. 

For example, Ukraine’s first President, Leonid Kravchuk, moved immediately 

after Ukraine regained independence to build strong relationships with the West. 

When he could not reach agreement with Moscow on the terms for the elimination 

of the strategic nuclear weapons on Ukrainian territory, he involved the United 

States. The resulting trilateral process successfully brokered a deal in early 1994. 

President Leonid Kuchma, who took office in July 1994, established a strategic 

partnership with the United States, concluded a partnership and cooperation agreement with the European Union, and agreed to a distinctive partnership with NATO. 

As Ukraine’s relations with the West strengthened, Moscow softened its approach 

toward Kyiv. In May 1997, Ukraine and Russia resolved the longstanding issue of 

basing rights for the Russian Black Sea Fleet in Crimea on terms acceptable to 

Kyiv, and signed a bilateral treaty that incorporated a clear and unambiguous recognition of Ukraine’s sovereignty and territorial integrity—something Ukrainian 

officials had sought since 1991. 

President Victor Yushchenko assumed office in 2005 following the Orange Revolution. While seeking stable relations with Moscow, he made no secret of his desire 

to integrate Ukraine fully into institutions such as the European Union and NATO. 

Kyiv opened negotiation of an association agreement with the European Union and 

asked for a NATO membership action plan. Other Yushchenko policies—including 

expanded use of the Ukrainian language, seeking to have the Holodomor recognized 

as genocide, and support for Georgian President Saakashvili—plus disputes over gas 

purchase contracts further angered Moscow. Relations between the two countries hit 

a low point in 2009. But the President failed to build elite or public support for his 

course; many Ukrainians grew concerned over the downturn in relations with 

Russia. 

MR. YANUKOVYCH’S FOREIGN POLICY

Victor Yanukovych became Ukraine’s fourth President in February 2010. He 

believed that ‘‘normalizing’’ relations with Russia should be his first foreign policy 

priority. 

President Yanukovych met with Russian President Medvedev in Kharkiv less 

than 2 months after taking office. At the meeting, the Ukrainians agreed to extend 

the Black Sea Fleet’s basing lease for an additional 25 years. In return, Russia’s 

Gazprom agreed to reduce the price that it charged Ukraine for natural gas by $100 

per thousand cubic meters for the remainder of the multiyear gas contract signed 

in 2009. Mr. Yanukovych and other Ukrainian officials praised the arrangement for 

significantly reducing Ukraine’s energy costs, though independent energy experts 

question whether Kyiv might not have negotiated a better deal, perhaps without 

having to extend the Black Sea Fleet’s lease. The government rammed the agreement through the Rada (Parliament) within just a few days of signature and with 

no substantial parliamentary discussion, despite opposition by the Rada’s foreign 

affairs, European integration and national security committees. 

At the same time, Kyiv dropped other policies that had generated Russian complaints: It downgraded the program to promote use of the Ukrainian language, 

ended the campaign to get the Holodomor recognized as genocide, and toned down 

relations with Georgia. While expressing interest in maintaining cooperative relaVerDate 0ct 09 2002 13:46 Jul 26, 2012 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6621 S:\HEARIN~1\112THC~2\2012IS~1\020112-A.TXT BETTY
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tions with NATO, the Yanukovych government made clear that it sought neither 

membership nor a membership action plan. With these policies, Kyiv swept the 

bilateral agenda with Moscow clear of most issues that the Russians had considered 

problematic. 

Even before the Kharkiv meeting, however, Ukrainian officials indicated that, 

while their first foreign policy priority was repairing the relationship with Russia, 

Kyiv planned to do so in the context of an overall policy that pursued balance between Ukraine’s relationship with the West and that with Russia. Senior Ukrainian 

officials made clear that Ukraine remained very interested in concluding an association agreement, which would include a deep and comprehensive free trade arrangement (FTA), and a visa facilitation agreement with the European Union as the vehicles to strengthen Ukraine’s integration into Europe. 

Ukrainian officials also indicated that they wanted a robust relationship with the 

United States. By all accounts, President Yanukovych was delighted with the opportunity that he had for a bilateral meeting with President Obama on the margins 

of the April 2010 nuclear security summit in Washington. 

One could see Kyiv’s outreach to the West and effort to strike a balanced foreign 

policy in several developments in May and June 2010. The Rada voted overwhelmingly to approve the annual plan for military exercises on Ukrainian territory, most 

of which involved NATO forces. Ukrainian officials ruled out the possibility of joining a customs union with Russia, Belarus, and Kazakhstan, as that would be incompatible with an FTA with the European Union. Kyiv declined to join the Russianled Collective Security Treaty Organization, which Moscow billed as a Eurasian 

counterpart to NATO. 

Western diplomats in 2010 also reported that the Ukrainian Government was 

doing its homework to prepare an association agreement and FTA with the European Union in a more serious manner than had been the case during the 

Yushchenko Presidency. A number of Western diplomats expressed the view that 

President Yanukovych wanted to be seen as the one who ‘‘brought Ukraine into 

Europe.’’

Other reports suggested that senior Ukrainian officials were becoming unhappy 

with Russia’s policies. For example, Ukrainian officials questioned why Moscow continued to pursue the South Stream gas pipeline, which would run along the Black 

Sea bottom and circumvent Ukraine, when the Ukrainian gas transit system had 

considerable excess capacity. As the Russians had no new gas to flow into South 

Stream, the pipeline, if constructed, would only divert gas from pipelines through 

Ukraine. 

Kyiv’s frustrations grew in 2011 as senior Ukrainian officials asserted that the 

price for Russian gas—even with the Kharkiv discount of $100 per thousand cubic 

meters—was too high and ‘‘unfair.’’ Gazprom showed no sign of budging. Ukrainian 

complaints increased at the end of the year, and Kyiv informed Gazprom that it 

would import only 27 billion cubic meters of gas in 2012. Gazprom officials responded that Ukraine had a ‘‘take or pay’’ contract and was obligated to take—or 

in any case pay for—41.6 billion cubic meters. These issues are currently unresolved. Press reports in December suggested that the Ukrainians were considering 

plans that would give Gazprom significant control of the Ukrainian gas pipeline system. Gazprom has long coveted Ukraine’s gas transit infrastructure, but there likely 

would be significant resistance in Kyiv to ceding control. 

DEMOCRATIC REGRESSION

Mr. Yanukovych was elected President in 2010 as the result of a process that 

domestic and international observers found to be free, fair, and competitive. Ms. 

Tymoshenko, who lost in the runoff round by about 3 percent of the vote, briefly 

challenged the result but offered no compelling evidence of major fraud. Western 

governments quickly recognized the result, which was Ukraine’s fifth consecutive 

nationwide election following the Orange Revolution to win plaudits from election 

observers. 

Unfortunately, questions soon arose about the Yanukovych government’s commitment to democratic principles and practices. Over the course of 2010 and 2011, concern grew about the government’s authoritarian tendencies. Some of the most troubling examples:

• Widespread reports began to emerge in spring 2010 of inappropriate activities 

by the Security Service of Ukraine (SBU), including approaching university officials for information and reporting on students who had taken part in 

antigovernment protests. SBU officers also reportedly approached nongovernmental organizations to seek information on their activities. 

9

• On September 30, 2010, the Constitutional Court of Ukraine invalidated the 

changes to the Constitution approved by the Rada in December 2004, after the 

replacement of four judges who opposed the decision by four new judges who 

supported it. The result was to revert to the Constitution that had been in effect 

prior to the Orange Revolution, which gave the President significantly stronger 

powers and weakened the authority of the Rada. The European Commission for 

Democracy through Law (Venice Commission) issued a report the following 

December which raised numerous questions about the Constitutional Court’s action. The report noted ‘‘it is clear that a change of the political system of a country based on a ruling of a constitutional court does not enjoy the legitimacy 

which only the regular constitutional procedure for constitutional amendment 

and preceding open and inclusive public debate can bring.’’

• Ukraine held nationwide local elections in October 2010. Observers found significant flaws, and both the European Union and U.S. Government expressed 

concern. The Congress of Local and Regional Authorities of the Council of 

Europe observer group issued a report in March 2011 noting concern over ‘‘a 

newly adopted local election law which created politically unbalanced electoral 

commissions, discretionary registration of candidates and overly complicated 

voting and counting procedures.’’ The report concluded with the assessment that 

‘‘overall, the local elections of 31 October 2010 in Ukraine met neither the 

standards that it wished to see, nor the standards set by the Presidential elections [in Ukraine] in January and February 2010.’’ The conduct of these elections raises concern about the Rada elections to be held in autumn 2012. 

• Attracting the most attention, former officials who served in the Cabinet under 

Ms. Tymoshenko have been arrested on charges that appear, to most observers, 

to be politically motivated. Among those arrested have been former Interior 

Minister Lutsenko, former First Deputy Justice Minister Korniychuk, former 

Acting Minister of Defense Ivashchenko, former First Deputy Chairman of 

Naftogaz Ukrainy Didenko, former Head of the State Customs Service of 

Ukraine Makarenko and former Economy Minister Danylyshyn (Mr. 

Danylyshyn sought and received political asylum in the Czech Republic). Then 

there is the case of Ms. Tymoshenko herself. She was charged in December 

2010 with abuse of state power stemming from her conclusion of the 2009 gas 

purchase contract with Russia. Her trial began in June 2011, and she was jailed 

in August for disrupting courtroom proceedings. In October, she was convicted 

and sentenced to 7 years in prison—a verdict immediately condemned by the 

United States, European Union, most major EU member states and Russia. The 

Parliamentary Assembly of the Council of Europe, in a report issued in January, criticized the charges against former government officials as amounting to 

‘‘post facto criminalization of normal political decisionmaking.’’ Although 

Ukrainian officials maintain that these arrests were legitimate and do not represent selective prosecutions, no comparable members of the current government have been arrested or charged, despite the general view that corruption 

has increased significantly under Mr. Yanukovych.

In 2006 Freedom House rated Ukraine as the first post-Soviet state other than 

a Baltic nation to achieve a ‘‘free’’ ranking. In January 2011, given the democratic 

problems within Ukraine, it became the first post-Soviet state to lose the ‘‘free’’ 

ranking when it was found to be only ‘‘partly free.’’ Freedom House reaffirmed that 

ranking last month. 

DEMOCRATIC REGRESSION AND UKRAINE’S RELATIONS WITH THE WEST

The authoritarian tendencies within Ukraine have affected Kyiv’s relations with 

the West. European and U.S. officials have long expressed concern about democratic 

regression, including warning senior Ukrainian officials as early as January 2011 

not to carry forward the charges against Ms. Tymoshenko, whose case has come to 

epitomize the problem of selective application of the law within Ukraine. 

Following her jailing in August, some deputies in EU member-state Parliaments 

stated that they would oppose ratification of the association agreement and FTA 

with Ukraine unless Ms. Tymoshenko was released. This is no surprise. The European Union has long regarded commitment to democratic principles as an important 

element of the association agreement process. In September 2011, Swedish Foreign 

Minister Bildt, EU Commissioner for Enlargement Fuele and European Parliament 

member Brok had a lengthy meeting with President Yanukovych and warned him 

of the damage that the Tymoshenko case was doing to EU-Ukrainian relations. 

The Rada passed up an opportunity to end the case in October when it examined 

the Criminal Code. Despite suggestions that it might annul the article on which the 

charge against Ms. Tymoshenko was based, it did not. Days later, the court conVerDate 0ct 09 2002 13:46 Jul 26, 2012 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6621 S:\HEARIN~1\112THC~2\2012IS~1\020112-A.TXT BETTY
10

victed her. The European Union responded by postponing a planned Yanukovych 

visit to Brussels. 

EU officials continued to state that Ms. Tymoshenko should be released and 

allowed to return to normal political life. In November meetings with President 

Yanukovych, Lithuanian President Grybauskaite, and Polish President Komorowski 

reiterated warnings that Ms. Tymoshenko’s imprisonment would damage EUUkraine relations and prevent signature of the (now completed) association agreement and FTA at the planned December EU-Ukraine summit in Kyiv. 

Although a number of European countries reportedly favored canceling the summit, EU President Van Rompuy and EU Commission Head Barrosso went to Kyiv 

and held a short meeting with President Yanukovych. They signed no agreements 

and made clear that signature would depend on Ms. Tymoshenko’s situation. 

Thus, at the beginning of 2012, EU-Ukraine relations are at a standstill. It is not 

clear what will happen with the association agreement and FTA, which were to provide the basis for a new stage in the relationship between Brussels and Kyiv. 

U.S.-Ukrainian relations are at a quiet point. Washington has few major issues 

on its bilateral agenda with Kyiv, reflecting the fact that many of the problems that 

troubled the relationship earlier have been resolved. More broadly, given everything 

else on the foreign policy agenda, Ukraine barely registers on the radar. Ukrainian 

officials have over the past 18 months actively sought to arrange meetings for President Yanukovych with President Obama or Vice President Biden, but without success. The lack of enthusiasm to meet with Mr. Yanukovych undoubtedly reflects the 

U.S. Government’s critical attitude toward the democratic developments that have 

taken place the past 2 years in Ukraine. 

THE RISK TO KYIV

Democratic regression most destructively sets back the ability of the Ukrainian 

people to have a free, fair, robust and competitive political system. It also has a 

destructive impact on Mr. Yanukovych’s professed foreign policy. 

Democratic backsliding puts at risk Ukraine’s relations with the West, in particular with the European Union. As the EU President has indicated, the European 

Union does not intend to proceed with signature of the association agreement and 

FTA until political circumstances within Ukraine change. Even were it prepared to 

do so, the association agreement and FTA must be approved by all 27 EU member 

states, and a number of deputies in EU member-state parliaments have already 

stated that they would oppose ratification so long as Ms. Tymoshenko remains in 

jail. 

Moreover, given the current difficulties within the European Union, such as the 

eurozone crisis, a number of member states believe that the EU’s attention should 

be focused internally and that the European Union should slow the pace of its 

engagement with neighboring states, particularly those which say they aspire to 

become EU members. For those EU member states, democratic regression within 

Ukraine offers a handy reason to justify slowing down the pace of EU relations with 

Kyiv. Even Kyiv’s traditional advocates within the European Union—such as 

Poland, Lithuania, and Sweden—appear to be flagging in their support for Ukraine. 

Mr. Yanukovych’s internal policies not only pose a major impediment to his goal 

of drawing closer to the European Union, they also endanger his goal of having a 

balance between Ukraine’s relations with the West and with Russia. Although Kyiv 

sought to repair its relations with Moscow in 2010, the two countries’ interests simply diverge on some issues. Take natural gas: a lower price for Ukraine means less 

revenue for Gazprom. Likewise, construction and operation of the South Stream 

pipeline would reduce the flow of gas through Ukrainian pipelines. Russian Prime 

Minister and presumptive President Putin has called for creation of a Eurasian 

Union to serve as a counterpart to the European Union. It is not exactly clear what 

the Eurasian Union might be in practice—and few other post-Soviet states have expressed enthusiasm for the idea—but it is almost certain that one of Mr. Putin’s 

goals is to increase Russian influence in the post-Soviet space. 

With weaker relations with the West, Kyiv will find that is has less room for maneuver in its dealings with Moscow. Tough negotiations will likely become even 

more difficult. Mr. Yanukovych only has to look north to Belarus and what happened to President Lukashenko once he had burned his bridges with the European 

Union and the United States following the December 2010 crackdown on opposition 

leaders and demonstrators. Facing a dire economic situation and with no hope for 

help from the West, Mr. Lukashenko struck a deal with Moscow that secured a 

lower price for gas and a loan from Russia—at the price of surrendering control of 

the Belarusian gas pipeline system to Gazprom. 

11

It is not clear why Mr. Yanukovych is putting himself and Ukraine in this position. He has regularly expressed a desire for closer relations with the European 

Union and a balanced foreign policy. He may be allowing personal hostility toward 

Ms. Tymoshenko and a desire to sideline her politically to dominate his decisions. 

Ironically, over the past year, the government’s actions against Ms. Tymoshenko 

have focused public attention on her, and her poll ratings and those of her party 

have increased significantly. 

Mr. Yanukovych may also calculate that the European Union and the United 

States will overlook his democratic regression and accept Ukraine without his having to adjust his domestic policies, believing that the West does not want to see 

Ukraine drift closer to Moscow’s orbit. That would reflect a fair measure of wishful 

thinking and overestimate the geopolitical importance that the West currently 

attaches to Ukraine. 

U.S. INTERESTS AND U.S. POLICY

Since the early 1990s, the United States has supported Ukraine’s development as 

a stable, independent, democratic state, with a robust market economy and growing 

links to the European and trans-Atlantic communities. Such a Ukraine is in the 

U.S. interest as it would contribute to the goal of a wider, more stable and secure 

Europe. It could be—and has been—an important partner in addressing critical 

questions such as proliferation challenges. The nuclear question, which dominated 

U.S.-Ukrainian relations in the early 1990s, has been resolved as the nuclear weapons systems that were in Ukraine have been eliminated and Kyiv has agreed to 

transfer its small stock of highly enriched uranium. 

Over the past two decades, the United States has provided several billion dollars 

in assistance to Ukraine to promote democratization, economic reform and the elimination of the strategic nuclear systems and infrastructure that Kyiv inherited following the end of the Soviet Union. The United States has led in shaping a strong 

partnership between NATO and Ukraine and has encouraged the European Union 

to deepen its relations with Ukraine. 

The U.S. interest has not changed. However, the circumstances within Ukraine 

have, and the Ukrainian Government is moving in the wrong direction. On democracy, it is walking back the gains that the Ukrainian people have made over the 

past 20 years, particularly in the period of 2005–2009. The West cannot and should 

not ignore that. 

The U.S. Government’s priority with regard to Ukraine now should be to encourage the Ukrainian Government to make the right choices regarding the country’s 

democratic development. This means releasing Ms. Tymoshenko and allowing her 

to return to normal political life. But it does not end with Ms. Tymoshenko. The 

Ukrainian Government needs to end its manipulation of the judicial system for political purposes against other members of the opposition. It should rein in agencies 

such as the Security Service of Ukraine. And it should work with the broad political 

spectrum to ensure that the upcoming autumn Rada elections are free, fair, and 

competitive. 

To promote this objective, the U.S. Government should, first of all, continue to underscore to Kyiv U.S. concerns about democratic regression and continue to remind 

the Ukrainian leadership that its internal political policies have a negative impact 

on its relationships with the United States and the West. Ambassador John Tefft 

and the U.S. Embassy in Kyiv are working hard to convey this message. Washington should reiterate it as often as possible, including when Senate and congressional delegations visit Ukraine. 

Second, the United States should keep the door open for a more positive relationship with Ukraine should Kyiv heed the message on democracy. A Ukraine that 

returns to the democratic path should be fully welcome in the European and transAtlantic communities. 

Third, the United States should coordinate closely with the European Union so 

as to maximize the impact of Western policy on decisions by Mr. Yanukovych and 

the Ukrainian leadership. The joint letter sent to President Yanukovych last 

September by Secretary of State Clinton and EU High Representative for Foreign 

Affairs and Security Policy Ashton provides just such an example of coordination between Washington and Brussels. It is especially useful for Washington to coordinate 

with the European Union now, as the European Union may be better placed to influence thinking in Kyiv. 

What do these policies mean in practice? As one example, the Ukrainian leadership greatly desires high-level contact with Washington, which gives it a degree of 

political legitimacy. Mr. Yanukovych would dearly appreciate an invitation to the 

White House or the chance to host President Obama in Kyiv. The U.S. Government 

12

should continue what appears to be a de facto policy of minimizing high-level meetings with Mr. Yanukovych. U.S. officials should inform Ukrainian officials that, as 

long as Kyiv imprisons opposition leaders and regresses on democracy, no meetings 

at the highest level will be possible. 

As a second example, Ukraine’s credit line with the International Monetary Fund 

is currently suspended, because Kyiv has failed to meet the conditions of the IMF 

loan. In the past, the U.S. Government has on occasion weighed in with the IMF 

to support a more lenient approach with Ukraine. Given the democratic regression 

in Ukraine, now would not be the time for Washington to take such an approach 

with the IMF. 

This approach does not mean freezing ties across the board. Normal diplomatic 

interaction should continue at most levels. The target should be the most senior 

leadership in Kyiv, those who are responsible for Ukraine’s democratic regression. 

As for assistance programs, the U.S. Government should carefully consider its priorities, especially as budget resources for Ukraine will be limited. U.S. assistance 

should aim to sustain civil society in Ukraine, which has made dramatic gains over 

the past 20 years. In this context, exchange programs that bring Ukrainians to the 

United States and Europe can play a major role. The U.S. Government should also 

continue assistance programs to promote energy security, so that Ukraine can become less dependent on imported energy. 

It may be time for U.S. and EU officials to consult as to whether it is appropriate 

to consider lists of Ukrainian individuals who would be denied visas to visit the 

United States and EU member states. Even the threat of this could send a forceful 

message to Kyiv and have a powerful effect on President Yanukovych and the elite 

around him. 

This is not a call for the type of isolation that the West has applied to Belarus. 

Ukraine has not yet regressed to that point. But the United States and European 

Union should seek effective ways to disabuse Mr. Yanukovych of the notion that he 

can pursue a more authoritarian course at home without repercussions for Kyiv’s 

relations with the West. 

CRYSTALLIZING A CHOICE

Some Ukrainian officials likely will warn that this kind of approach by the United 

States and European Union will cause Ukraine’s leadership to turn toward Russia. 

Western officials should not be taken in by this. If Ukraine truly wants to join 

Europe, then its leadership must accept the democratic values that prevail in 

Europe. If the leadership is not prepared to adopt such values, then how can Europe 

and the West integrate Ukraine? 

Moreover, Kyiv does not wish to fall too closely into Moscow’s orbit. Mr. 

Yanukovych does not want to compromise Ukrainian sovereignty; he wants to be the 

leader of a fully independent state. The Ukrainian elite and public likewise overwhelmingly support an independent and sovereign Ukrainian state. For the Ukrainian oligarchs—who control so much of the Ukrainian economy—the Russian model 

holds little appeal. 

The overall goal of U.S. and European Union policy thus should be to crystallize 

in Mr. Yanukovych’s mind the following choice. He can have a more authoritarian 

political system, more difficult relations with the West, and a greatly weakened 

hand in dealing with Russia, or he can return to a more democratic approach and 

have a stronger relationship with the West and a balanced foreign policy. In the 

end, Mr. Yanukovych has reasons to opt for the latter course. The West should face 

him with the choice as clearly as possible.

Senator SHAHEEN. Thank you very much. 

Mr. Wilson. 

STATEMENT OF DAMON M. WILSON, EXECUTIVE VICE 

PRESIDENT, ATLANTIC COUNCIL, WASHINGTON, DC 

Mr. WILSON. Madam Chairman, Ranking Member, I am honored 

to speak before your committee on the situation in Ukraine. 

Ukrainian democrats and their supporters share a vision of an 

independent, sovereign Ukraine with strong democratic institutions, rule of law, and a prosperous free market, embedded in 

Europe, a partner of the United States, and at peace with Russia. 

Yet, 20 years after independence, Ukraine’s young democracy, its 

cultural identity, and weak institutions face political manipulation 

13

and its fragile economy is subject to massive distortions from widespread, top-down corruption. In short, Ukraine’s sovereignty is not 

guaranteed, its democracy is not inevitable, and its market is not 

free. 

Today Ukraine teeters between Eurasian malaise and an ambivalent Europe. Indeed, Ukraine’s future is in play. Decisions taken 

now and in the coming year by President Yanukovych and his government, the Ukrainian political opposition, civil society, media, 

youth, as well as the United States and the European Union, will 

determine whether Ukraine evolves into a European democracy or 

descends into a post-Soviet authoritarian kleptocracy. 

Indeed, Ukraine is at a crossroads. And there is much at stake 

for transatlantic interests. 

President Viktor Yanukovych and the Ukrainian Government are 

pursuing contradictory policies: they seek to integrate Ukraine into 

Europe while emasculating their domestic opposition. In their first 

2 years in office, they have made progress on both, eliminating his 

key challenger from politics and negotiating a landmark deal with 

the European Union. Yet, ultimately, they must choose. 

The choice is not between Russia and the West. In many respects, this is a false choice. The choice is whether Ukraine sees 

its future in the European mainstream or relegated to the borderlands. The outcome rests on whether Yanukovych and his government decide their political preservation is more important than 

anchoring Ukraine to the institutions of Europe. 

Ukraine’s difficult situation today is a result of the failure of 

political leadership in the wake of the Orange Revolution. Orange 

leaders, while allowing political pluralism to thrive, disappointed 

the Ukrainian people by failing to govern effectively. Their infighting opened the door to Yanukovych’s rehabilitation and election in 

2010 as President in free and fair elections. 

When President Yanukovych came to power, he began to centralize authority. His advisors offer a compelling explanation. After 

years of political chaos and economic mismanagement, Ukraine’s 

new leaders consolidated power in order to be able to govern more 

effectively and to implement long-needed reforms. And in many 

cases, the government has pursued difficult economic reforms 

necessitated by the global financial crisis including, for example, 

raising the retirement age. 

At the same time, under Yanukovych, Ukraine has been a 

responsible international actor, advancing practical negotiations 

with the European Union, agreeing with the United States to 

eliminate highly enriched uranium, and managing more normal relations with Russia. 

However, President Yanukovych’s first 2 years in office provide 

a sufficient record to sound the alarm on the state of democracy. 

We have witnessed selective prosecutions of opposition figures, a 

more restrictive media environment, disturbing involvement of the 

security service in domestic politics, seriously flawed local elections 

in October 2010, pressure on civil society, an erosion of free speech, 

consolidation of executive influence over the judiciary, manipulation of the electoral code in advance of parliamentary elections 

this fall, and continued rampant corruption. In essence, the ruling 

Party of Regions has centralized authority, governing all of 

14

Ukraine much as it governed its stronghold oblasts like Donetsk, 

weakening Ukrainian society’s checks and balances. 

The vision of a democratic European Ukraine, however, is not 

lost. 

As we look forward, Ukraine faces three key tests: its handling 

of political prosecutions, the October elections, and its energy 

security. 

Despite protests to the contrary, Ukrainian authorities have pursued selective prosecutions against political opponents, most notably former Prime Minister Yulia Tymoshenko. She is not an 

isolated incident but is illustrative of a disturbing pattern that is 

corrosive to democracy. If those in power believe that the price of 

losing an election is prison, they are unlikely to ever relinquish 

power. Through its own actions, the Party of Regions has set this 

dangerous dynamic in play. After months of various officials telling 

many in the West that the President would find a way within the 

law to end the prosecution of Tymoshenko, she has been sentenced 

to 7 years in prison and is now facing a set of new charges. 

Ukraine’s leaders seem to have calculated that the threat she poses 

politically outweighs the cost of international opprobrium. 

American and European officials have spoken out forcefully regarding her case, and the EU has delayed signing an association 

agreement over the issue. Both the United States and European 

partners should keep this issue at the top of their agenda with 

Ukraine, not allowing the passing of time to diminish the Ukrainians’ calculations of the costs of their actions. Washington and 

Brussels should also consider taking additional measures to raise 

those costs. 

Second, the most critical test is whether Ukraine is able to conduct free and fair parliamentary elections in October. I have serious concerns already about the Ukrainian authorities’ actions to 

tilt the scales in their favor through changes to the electoral code 

and influence over the judiciary. 

Nonetheless, these elections are in play. Recent polling indicates 

that while the opposition remains weak, the ruling Party of 

Regions has lost tremendous support throughout Ukraine, including in its political base in the east. Given there is a genuine possibility for competitive elections, authorities may be tempted to take 

extraordinary measures beyond administrative means to maintain 

their majority in Parliament. 

Therefore, now is precisely the time to shine a spotlight on 

Ukraine. The U.S. and EU members need to work together closely 

to help ensure a level playing field through support for measures 

that can counteract fraud. This includes helping independent civil 

society to observe elections, monitor media, conduct exit polls and 

parallel vote counts. 

Furthermore, the European Union can make clear that ratification of any deep and comprehensive free trade agreement depends 

not only on the issue of political prosecutions, but also the conduct 

of these elections. 

As we judge Ukraine’s performance on these tests, United States 

and European objectives should be clear. 

First, in the near term, transatlantic policies should aim to check 

democratic backsliding and help Ukrainians demand a free and fair 

15

election this fall. As a first step, this requires that the sham trials 

against Tymoshenko end and that she be released. 

Second, we should continue to promote Ukraine’s genuine European integration by fostering societal level contacts while government-to-government negotiations stall. 

Third, we should continue to help Ukraine increasingly integrate 

its market into the global economy, reorienting its economy away 

from Soviet-era patterns of trade. 

And finally, the United States and our transatlantic partners 

should continue to support Ukraine’s sovereignty and independence. 

Holding Ukraine to account on democracy will not send Ukraine 

into Russia’s arms. Whether it is Ukrainians in the west of the 

country whose reference is Poland rather than Russia, Ukrainian 

oligarchs who fear economic domination by their Russian counterparts, or Ukraine’s political elites who have grown accustomed to 

managing their own nation, Ukrainians will play the lead role in 

preserving their sovereignty. 

So as Members of Congress, you have much on your plate. It is 

important to remember that Ukraine’s success or failure as a free 

market democracy will reverberate far beyond its borders. Ukraine 

can help anchor a region plagued by uncertainty, moving the region 

closer to European norms, advancing the vision of a Europe whole 

and free, or alternatively, it will set back reform in the broader 

region and undermine the goal of completing Europe. 

Madam Chairman, Ukraine is indeed at a crossroads. Its democracy is in play. Its place in Europe is in play. And its reliability 

as a partner of the United States is in play. Western policy can 

sharpen the choices facing Ukrainian leaders today. 

Thank you, Madam Chairman and Ranking Member. I look forward to your questions. 

[The prepared statement of Mr. Wilson follows:]

PREPARED STATEMENT OF DAMON M. WILSON

Madam Chairman, ranking member, members of the committee, I am honored to 

speak before your committee on the situation in Ukraine. 

Ukrainian democrats and their supporters share a vision of an independent, sovereign Ukraine with strong democratic institutions, rule of law, and a prosperous 

free market, embedded in Europe, a partner of the United States, and at peace with 

Russia. 

Yet 20 years after independence, Ukraine’s young democracy, cultural identity, 

and weak institutions face political manipulation and its fragile economy is subject 

to massive distortions from widespread, top-down corruption. In short, Ukraine’s 

sovereignty is not guaranteed, its democracy is not inevitable, and its market is not 

free. 

Today, Ukraine teeters between Eurasian malaise and an ambivalent Europe. Indeed, Ukraine’s future is in play. Decisions taken now and in the coming year by 

President Yanukovych and his government, the Ukrainian political opposition, civil 

society, media, and youth—as well as the United States and European Union—will 

determine whether Ukraine evolves into a European democracy or descends into a 

post-Soviet authoritarian kleptocracy. 

Indeed, Ukraine is at a crossroads. And there is much at stake for transatlantic 

interests. 

President Viktor Yanukovych and the Ukrainian Government are pursuing contradictory policies: They seek to integrate Ukraine into Europe, while emasculating 

their domestic opposition. In their first 2 years in office, they have made progress 

on both, eliminating his key challenger from politics and negotiating a landmark 

deal with the European Union. Yet ultimately, they must choose. 

16

The choice is not between Russia and the West. In many respects, this is a false 

choice. The choice is whether Ukraine sees its future in the European mainstream 

or relegated to the borderlands. The outcome rests on whether Yanukovych and his 

government decide their political preservation is more important than anchoring 

Ukraine to the institutions of Europe. 

Ukraine’s difficult situation today is a direct result of the failure of political leadership in the wake of the Orange Revolution. Orange leaders, while allowing political pluralism to thrive, disappointed the Ukrainian people by failing to govern 

effectively. Their infighting opened the door to Yanukovych’s rehabilitation and election in 2010 as President in free and fair elections, Ukraine’s fourth set of free elections in a row at the time. 

When President Yanukovych came to power, he began to centralize authority. His 

advisors offer a compelling explanation: After years of political chaos and economic 

mismanagement, Ukraine’s new leaders consolidated power in order to be able to 

govern more effectively and to implement long-needed reforms. And in many cases, 

the government has pursued difficult economic reforms necessitated by the global 

financial crisis, including for example raising the retirement age. 

At the same time, under Yanukovych, Ukraine has been a responsible international actor, advancing practical negotiations with the European Union, agreeing 

with the United States to eliminate highly enriched uranium, and managing more 

normal relations with Russia. 

However, President Yanukovych’s first 2 years in office provide a sufficient record 

to sound the alarm on the state of democracy. We have witnessed selective prosecutions of opposition figures, a more restrictive media environment, disturbing involvement of the security service (SBU) in domestic politics, seriously flawed local elections in October 2010, pressure on civil society, an erosion of speech, consolidation 

of executive influence over the judiciary, manipulation of the electoral code in 

advance of parliamentary elections this fall, and continued rampant corruption. In 

essence, the ruling Party of Regions has centralized authority, governing all of 

Ukraine much as it governed its stronghold oblasts like Donetsk, while weakening 

Ukrainian society’s checks and balances. 

The vision of a democratic, European Ukraine is not lost however. Ukraine’s political and cultural diversity is a bulwark against any one force dominating the political landscape. As we look forward, Ukraine faces three key tests: Its handling of 

political prosecutions, the October parliamentary elections, and its energy security. 

First, despite protests to the contrary, Ukrainian authorities have pursued selective prosecutions against political opponents, most notably former Prime Minister 

Yuliya Tymoshenko. She is not an isolated incident, but is illustrative of a disturbing pattern that is corrosive to democracy. If those in power believe that the 

price of losing an election is prison, they are unlikely to ever relinquish power. 

Through its own actions, the Party of Regions has set this dangerous dynamic in 

play. After months of various officials telling many in the West that the President 

would find a way within the law to end the prosecution of Tymoshenko, she has 

been sentenced to 7 years in prison and is now facing a set of new charges. 

Ukraine’s leaders seem to have calculated that threat she poses politically outweighs the cost of the international opprobrium. 

American and European officials have spoken out forcefully regarding her case, 

and the European Union has delayed signing an association agreement over this 

issue. Both the United States and its European partners should keep this issue at 

the top of their agenda with Ukraine, not allowing the passing of time to diminish 

the Ukrainians’ calculations of the costs of their actions. Washington and Brussels 

should also consider additional measures to raise those costs. 

Second, the most critical test is whether Ukraine is able to conduct free and fair 

parliamentary elections in October. I already have serious concerns about Ukrainian 

authorities’ actions to tilt the scales in their favor through changes to the electoral 

code and influence over the judiciary. After free and fair parliamentary elections in 

2006 and 2007, there was no compelling need to revise the electoral code in advance 

of these elections. The ruling party’s singular focus to do so raises concerns about 

those in power changing the rules of the game to their advantage. 

Nonetheless, these elections are in play. Recent polling indicates that, while the 

opposition remains weak, the ruling Party of Regions has lost tremendous support 

throughout Ukraine, including in its political base in the east. Given there is a genuine possibility for competitive elections, authorities may be tempted to take 

extraordinary measures beyond administrative means to maintain their majority in 

Parliament. 

Therefore, now is precisely the time to shine a spotlight on Ukraine. The United 

States and European Union members need to work together closely to help ensure 

a level playing field through support for measures that can counteract fraud. This 

17

includes helping independent civil society to observe elections, monitor media, and 

conduct exit polls and parallel vote counts. 

Furthermore, the European Union can make clear that ratification of any Deep 

and Comprehensive Free Trade Agreement depends not only on the issue of political 

prosecutions, but also on the conduct of these elections. Similarly, the United States 

should make clear that the conduct of these elections will determine the possibilities 

in our bilateral relationship. 

Ukraine has been a valued partner given its commitment to hand over all of its 

highly enriched uranium as part of President Obama’s nuclear security initiative. 

The risk, however, is that the Ukrainians will perceive they can cooperate on this 

strategic priority, and in return earn a pass on democracy issues. Washington needs 

to continue to send clear, consistent messages to Kyiv about the costs of poor elections in October. 

A third key test for Ukraine is how it handles its dismal record on energy security. The energy sector in Ukraine is opaque and corrupt. More importantly, the government’s management of energy is corrosive to Ukraine’s democracy and sovereignty. The scale of corruption in the energy sector threatens to undermine 

Ukraine’s democracy, as it provides an incentive for those in power to perpetuate 

their rule both for personal enrichment and to avoid prosecution once out of power. 

Corruption in the energy sector is also a national security threat as it allows unscrupulous interests to manipulate Ukrainian officials and policy. The best way to 

strengthen Ukraine’s sovereignty, and to mitigate Ukraine’s dependency on Russia 

for natural gas, would be to pursue an aggressive energy efficiency program and to 

liberalize its antiquated energy sector inviting in investors and promoting transparency. 

As we judge Ukraine’s performance on these three tests, U.S. and European objectives should be clear. 

First, in the near term, transatlantic policy should aim to check democratic backsliding and help Ukrainians demand a free and fair election this fall. As a first step, 

this requires that the sham trials against Yuliya Tymoshenko end and that she be 

released. 

Second, we should continue to promote Ukraine’s genuine European integration 

by fostering societal level contacts while government-to-government negotiations 

stall. While some European nations seek to tether Ukraine to the European Union, 

many would prefer that Ukraine have no future home in Europe. U.S. policy should 

state that a democratic Ukraine that pursues reforms can earn its place in Europe’s 

institutions. 

Third, we should continue to help Ukraine increasingly integrate its markets into 

the global economy, reorienting its economy away from Soviet era patterns of trade. 

As Ukraine’s economic interests increasingly value their credibility in Western markets, these forces will support rule of law at home and some will value Ukraine’s 

democratic credentials abroad. 

Finally, the United States and our transatlantic partners should continue to support Ukraine’s sovereignty and independence. As Vladimir Putin plans his return 

to the Russian Presidency, we are likely to hear more ideas along the lines of his 

proposal for a Eurasian Union. While cooperative, constructive relations between 

Ukraine and Russia are healthy, Russian efforts to exert a sphere of influence, if 

unchecked, will lead to greater demands and ultimately greater instability over 

time. Our engagement with Ukraine through good times and bad will bolster Kyiv’s 

ability to determine its own future. 

Holding Ukraine to account on democracy, however, will not send Ukraine into 

Russia’s arms. Whether it is Ukrainians in the west of the country whose reference 

is Poland rather than Russia, Ukrainian oligarchs who fear economic domination by 

their Russian counterparts, or Ukraine’s political elites who have grown accustomed 

to managing their own nation, Ukrainians will play the lead role in preserving their 

sovereignty. 

As Members of Congress, you have much on your plate. The United States interests are global. So why should U.S. policymakers concern themselves with Ukraine. 

I would offer three reasons. 

First, as a nation with almost as many people as Spain and as much land as 

France, and with shared borders with the European Union, NATO, and Russia, 

Ukraine is a major actor and of significant importance to Euro-Atlantic security and 

prosperity. Much of the history of conflict in Europe is about insecurity in the land 

between Germany and Russia; as long as Ukraine’s future remains uncertain, there 

is a risk of instability. 

Second, Ukraine’s success or failure as a free market democracy will reverberate far beyond its borders. Ukraine can help anchor a region plagued by uncertainty, moving the region closer to European norms, and advancing the vision of a 

18

Europe whole, free, and at peace. Alternatively, its failure will set back reform in 

the broader region and undermine the goal of ‘‘completing Europe.’’

Third, change in Ukraine may be among the best hopes for change in Russia. 

Most analysts think about how developments in Russia will impact Ukraine. I tend 

to believe that developments in Ukraine can influence Russia. First, failure in 

Ukraine would validate Vladimir Putin’s narrative to the Russian people that experimentation with democracy in the former Soviet Union leads to political chaos 

and economic instability; ‘‘democracy is dangerous.’’ However, Ukraine’s success as 

a market-oriented European democracy would challenge those assumptions. For so 

many in Russia who have been taught to think of Ukrainians as their backward 

cousins, progress in Ukraine would underscore the viability of progress in Russia. 

Madam Chairman, Ukraine is indeed at a crossroads. Its democracy is in play. 

Its place in Europe is in play. And its reliability as a partner of the United States 

is in play. Western policy can help sharpen the choices facing Ukrainian leaders. 

A President Yanukovych who ceases political prosecutions and releases 

Tymoshenko, presides over fair parliamentary elections, combats corruption, 

achieves a ratified association agreement with the European Union, and advances 

a top U.S. nonproliferation objective has the opportunity to remake his image in the 

world and in his own nation. The choice is his. 

Thank you Madam Chairman, ranking member, and members of the committee. 

I look forward to answering your questions.

Senator SHAHEEN. Thank you very much. 

Mr. Chow. 

STATEMENT OF EDWARD C. CHOW, SENIOR FELLOW, ENERGY 

AND NATIONAL SECURITY PROGRAM, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES, WASHINGTON, DC 

Mr. CHOW. Madam Chair, it is my distinct honor to testify before 

your subcommittee. Unlike my fellow panelists who served with 

distinction at the Department of State and White House, I come to 

you as a simple oil and gas analyst and practitioner in the international petroleum industry for more than 30 years. In the past 

dozen years, I have observed the Ukrainian energy sector, sometimes up close, and written on the subject. I had the occasion to 

advise four separate Cabinets of Ministers of Ukraine on energy, 

including those led by then-Prime Ministers Yanukovych and 

Tymoshenko. It is this experience and knowledge that informed me 

for today’s testimony. 

I would start off by saying, with all due respect to the title of 

this hearing, that as far as energy is concerned, Ukraine, a country 

which seems perpetually at crossroads, is no longer in that position. It may have been at crossroads in 2005 right after the Orange 

Revolution when there was a tremendous opportunity to shed its 

Soviet legacy and incomplete economic transition and to embark on 

the path of energy reform that could have greatly enhanced its 

domestic energy condition and improved energy security for both 

itself and Europe. However, infighting among the Orange political 

forces, including over energy rents, and secondarily insufficient 

attention and engagement by the West extinguished these hopes. 

Since then, Ukraine has been on a dangerous path toward energy 

insecurity which has accelerated in the last 2 years. All the pity 

as Ukraine has enormous potential as an energy producer, efficient 

consumer, and key transit partner for Russia/Central Asia and 

Europe. 

Until the discovery and development of major West Siberian gas 

fields in the 1970s, Ukraine was an exporter of gas to the Soviet 

Republic of Russia. Ukrainian gas production peaked at 69 billion 

cubic meters in 1975, more than its current annual consumption. 

19

Today Ukraine’s domestic gas production has stagnated below 20 

billion cubic meters and it is two-thirds dependent on gas imports 

from Russia. 

I have not met a single Ukrainian or Western geologist who does 

not believe that Ukraine has the geologic prospects to greatly 

increase its domestic oil and gas production. If proper policies and 

investment conditions were in place, domestic gas production can 

easily increase by 50 percent in a few short years. Together with 

energy efficiency improvements, Ukraine can be more than 50 percent self-sufficient in gas. Currently Ukraine is the third-largest 

gas consumer in continental Europe. It consumes two-thirds as 

much gas as Germany does, while its GDP is less than 5 percent 

of Germany’s. 

Ukraine’s oil and gas sector is operated in a totally dysfunctional 

manner. This, as they say in this part of the world, is not an accident. Various state energy assets have been hijacked by rent seekers for their private gain. Regulation and pricing are left deliberately murky in order to benefit private interests. This is not a 

particular indictment of the current Government of Ukraine. In 

fact, these conditions of Ukraine’s incomplete transition from its 

Soviet command economy have remained through the terms of four 

different Presidents and many more Prime Ministers and Cabinets 

of Ministers in the 20 years of independence. Franchises on control 

of energy assets may shift, but the business model never changed. 

In fact, if you were to design an energy system that is optimized 

for corruption, it might look very much like Ukraine’s. You would 

start with a wholly state-owned monopoly that is not accountable 

to anyone except the head of the country who appoints the management of this company. It would operate nontransparently without 

being held accountable by shareholders or capital markets since its 

chronic indebtedness is periodically repaid by the state treasury. 

Domestic production would be priced artificially low, ostensibly 

for social welfare reasons, leading to a gray market in gas supply 

that is allocated by privileged access rather than by price. Low 

prices suppress domestic production and energy efficiency improvement, thereby requiring import of large volumes of gas which coincidentally is controlled by the same state monopoly or its chosen 

middleman company. The opaque middleman is frequently paid 

handsomely in kind rather than in cash, which allows him to reexport the gas or to resell to high-value domestic customers, leaving the state company with the import debt and social obligations. 

Ukraine has also eroded its significant advantages as a major oil 

and gas transit country between Russia/Central Asia and European 

markets by virtue of its geographic location and Soviet legacy pipeline infrastructure. Ukraine inherited Soviet gas transit pipelines, 

which had a nameplate capacity of 175 billion cubic meters per 

year, as well as abundant and ideally located gas storage. 

Yet, today Russian gas transit amounts to less than 100 billion 

cubic meters from a post-Soviet average of 120 billion cubic meters, 

and Russia is busy building and planning pipelines that bypass 

Ukraine, namely Nord Stream and especially South Stream. If Russia proceeds next year with South Stream at 63 billion cubic 

meters, then by 2016 it would have bypassed pipeline capacity that 

completely replaces current gas transit through Ukraine, which 

20

represented about 80 percent of the gas Russia sells to Europe or 

20 percent of European gas demand. 

This developed because Ukraine has proven itself as an unreliable transit partner for both Russia and Europe. Successive 

Ukrainian governments have tried to use its transit leverage to extract below-market gas prices from Russia. This persisted even 

though conditions that facilitated the barter of cheap gas for transit, namely low-price Central Asian gas, disappeared about 5 years 

ago. Even when gas prices were low, Naftogaz is chronically indebted to Gazprom, leading to contract disputes, regular brinksmanship, and occasional gas cutoffs. 

The gas crisis of January 2006 and 2009 seriously affected gas 

supply for Europe at the height of winter and underscored that 

Ukraine is a transit liability. Frequently Europe acts as if it is an 

innocent victim of pipeline disputes between Russia and Ukraine. 

EU blindly embraces every deal the two come up with no matter 

how fatally flawed the terms are or, therefore, how ephemeral their 

compliance is. 

The root causes of Ukraine’s energy insecurity are well known, 

as are their remedies. They are well documented in the Energy 

Policy Review of Ukraine conducted by the International Energy 

Agency and published in 2006. Repeated attempts have been made 

by international institutions, including the International Monetary 

Fund, World Bank, European Union, and U.S. Government to persuade and support Ukrainian authorities to enact serious energy 

sector reforms. They have been met generally by lip service even 

as fundamental conditions continue to deteriorate in the country. 

The recommendations basically come down to modernizing the 

business practice of this large and nontransparent sector of the 

Ukrainian economy which has served as an exclusive playground 

for Ukrainian leaders for the past 20 years. This means the end of 

rent-seeking that leaks billions of dollars per year, transparent and 

fair rules of the game for investors that do not favor politically connected interests, and above all, energy pricing reform. 

Instead of fundamental reform and the immediate benefits that 

can be achieved, this Ukrainian Government would rather talk 

about fanciful projects that are 5 years or further away in the 

future, such as shale gas or other unconventional gas production, 

liquefied natural gas imports, and offshore exploration, none of 

which can possibly succeed without energy reform. 

At best, this is a misplacement of policy priorities. At worst, it 

is a deliberate misdirection in order to change the topic and to 

divert attention away from current and future mischief in the energy sector. 

For the moment, Russia and Ukraine are supposedly at an impasse in their gas price negotiations, after the disastrous decision 

President Yanukovych and his government made on gas agreement 

with Russia in Kharkiv in April 2010. Ironically, the Kharkiv 

agreement essentially confirmed and locked his new government 

into the terms of the agreement made by then-Prime Minister 

Yulia Tymoshenko and Prime Minister Vladimir Putin in January 

2009, the unfairness for which she is currently accused and jailed. 

The most likely scenario is an agreement will be reached soon 

between Russia and Ukraine on gas that cedes partial control and/

21

or ownership of Ukraine’s international gas transit system to 

Gazprom in exchange for another so-called discount on gas pricing. 

Despite such an agreement, Russia will likely continue to 

progress the South Stream pipeline as important for its own interests or at least hold it in reserve. Russia may expect to gain full 

control of the gas transit system over time, as Ukraine continues 

to mismanage its energy sector and pile on gas debt to Russia. 

The result of this scenario is that Ukraine becomes an energy 

appendage of Russia’s. What is the geopolitical significance for the 

United States and Europe of this possible outcome I will leave to 

others more expert on such subjects on this panel. 

I would offer one small recommendation. If the United States 

and our European allies care about Ukraine’s energy vulnerability 

and its negative impact on the region, then they must address the 

policy remedies not only to Ukrainian leaders but also publicly to 

Ukrainian society. Ukraine has a vibrant civil society, an educated 

public, and relatively free press for post-Soviet space. Speaking privately to political leaders about urgently needed energy reform has 

proven ineffective in the past and may even enable their bad behavior. It is time we invest in a direct dialogue with the Ukrainian 

people if we believe we have a stake in the energy health of this 

important country. 

Thank you. 

[The prepared statement of Mr. Chow follows:]

PREPARED STATEMENT EDWARD C. CHOW

Madam Chair, it is my distinct honor to testify before your subcommittee. Unlike 

my fellow panelist, who served with distinction at the Department of State and 

White House, I come to you as a simple oil and gas analyst and practitioner in the 

international petroleum industry for more than 30 years. In the past dozen years, 

I have observed the Ukrainian energy sector, sometimes up close, and written on 

the subject. I had the occasion to advise four separate cabinets of ministers of 

Ukraine on energy, including those led by then-Prime Ministers Yanukovych and 

Tymochenko. It is this experience and knowledge that informed me for today’s 

testimony. 

I would start off by saying, with all due respect, that as far as energy is concerned 

Ukraine—a country which seems perpetually at crossroads—is no longer in that position. It may have been at crossroads in 2005, right after the Orange Revolution, 

when there was a tremendous opportunity to shed its Soviet legacy and incomplete 

economic transition; and to embark on a path of energy reform that could have 

greatly enhanced its domestic energy condition and improved energy security for 

both itself and Europe. However, infighting among the Orange political forces, including over energy rents, and secondarily insufficient attention and engagement by 

the West extinguished these hopes. 

Since then, Ukraine has been on a dangerous path toward energy insecurity, 

which has accelerated in the last 2 years. All the pity as Ukraine has enormous 

potential as an energy producer, efficient consumer, and key transit partner for 

Russia/Central Asia and Europe. 

Until the discovery and development of major West Siberian gas fields in the 

1970s, Ukraine was an exporter of gas to the Soviet Republic of Russia. Ukrainian 

gas production peaked at 69 billion cubic meters (bcm) in 1975, more than its current annual consumption. Today Ukraine’s domestic gas production has stagnated 

below 20 bcm and it is two-thirds dependent on gas imports from Russia. Reliance 

on imports has diminished only because of the dismal performance of the overall 

Ukrainian economy, not because of efficiency improvements or increased domestic 

production. 

I have not met a single Ukrainian or Western geologist who does not believe that 

Ukraine has the geologic prospects to greatly increase its domestic oil and gas production. If proper policies and investment conditions were in place, domestic gas 

production can easily increase by 50 percent in a few short years. Together with energy efficiency improvements, Ukraine can be more than 50 percent self-sufficient 

22

in gas. Currently Ukraine is the third-largest gas consumer in continental Europe 

(outside of Russia). It consumes two-thirds as much gas as Germany does, while its 

GDP is less than 5 percent of Germany’s. 

Ukraine’s oil and gas sector is operated in a totally dysfunctional manner. This, 

as they say in this part of the world, is not an accident. Various state energy assets 

have been hijacked by rent seekers for their private gain. Regulation and pricing 

are left deliberately murky in order to benefit private interests. This is not a particular indictment of the current Government of Ukraine. In fact these conditions 

of Ukraine’s incomplete transition from its Soviet command economy have remained 

through the terms of four different Presidents and many more Prime Ministers and 

Cabinets of Ministers in the 20 years of independence. Franchises on control of energy assets may shift, but the business model never changed. 

In fact, if you were to design an energy system that is optimized for corruption, 

it might look very much like Ukraine’s. You would start with a wholly state-owned 

monopoly that is not accountable to anyone except the head of the country who appoints the management of this company. It would operate nontransparently without 

being held accountable by shareholders (who might demand legal rights as owners) 

or capital markets since its chronic indebtedness is periodically repaid by the state 

treasury. 

Domestic production would be priced artificially low, ostensibly for social welfare 

reasons, leading to a grey market in gas supply that is allocated by privileged access 

rather than by price. Low prices suppress domestic production and energy efficiency 

improvement, thereby requiring import of large volumes of gas which coincidentally 

is controlled by the same state monopoly or its chosen middleman company. The 

opaque middleman is frequently paid handsomely in-kind, rather than in cash, 

which allows him to reexport the gas or to resell to high-value domestic customers, 

leaving the state company with the import debt and social obligations. 

Ukraine has also eroded its significant advantages as a major oil and gas transit 

country between Russia/Central Asia and European markets by virtue of its geographic location and Soviet legacy pipeline infrastructure. Ukraine inherited Soviet 

gas transit pipelines, which had a nameplate capacity of 175 bcm per year, as well 

as abundant and ideally located gas storage capacity. In addition, Ukraine’s oil transit pipelines have a capacity of more than 1 million barrels per day, linking Russian 

and Central Asian oil production with landlocked markets in Central Europe. 

Yet today Russian gas transit amounts to less than 100 bcm from a post-Soviet 

average of 120 bcm and Russia is busy building and planning pipelines that bypass 

Ukraine, namely Nord Stream and especially South Stream. When the second line 

of Nord Stream is completed by the end of this year, it will bring capacity to 55 

bcm per year. If Russia proceeds next year with South Stream at 63 bcm, by 2016, 

it would have bypass pipeline capacity that completely replaces current gas transit 

through Ukraine, which represented about 80 percent of the gas Russia sells to 

Europe or 20 percent of European gas demand. 

This developed because Ukraine has proven itself as an unreliable transit partner 

for both Russia and Europe. Successive Ukrainian governments have tried to use 

its transit leverage to extract below-market gas prices from Russia. This persisted 

even though conditions that facilitated the barter of cheap gas for transit, namely 

low-priced Central Asian gas available to Russia, disappeared about 5 years ago. 

Even when gas prices were low, Naftogaz (the Ukrainian state company) is chronically indebted to Gazprom, leading to contract disputes, regular brinksmanship, 

and occasional gas cutoffs. Instead of maintaining and enhancing the reliability of 

the Ukrainian pipeline system with the transit revenue it earned in order to attract 

higher volumes, Ukraine raised serious doubts in the minds of energy producers and 

consumers. 

The gas crisis of January 2006 and 2009 seriously affected gas supply for Europe 

at the height of winter and underscored that Ukraine is a transit liability. Consequently, even the EU-sponsored Nabucco pipeline proposal is as much a diversification away from the risks of transit through Ukraine as a diversification from 

over-dependence on Russian gas supply. More frequently, Europe acts as if it is an 

innocent victim of pipeline disputes between Russia and Ukraine. EU blindly embraces every deal the two come up with, no matter how fatally flawed the terms 

are or how ephemeral their compliance, as proved to be the case in both 2006 and 

2009. 

The root causes of Ukraine’s energy insecurity are well known, as are their remedies. They were well documented in an ‘‘Energy Policy Review of Ukraine’’ conducted by the International Energy Agency and published in 2006. Repeated attempts have been made by international institutions, including the International 

Monetary Fund, World Bank, European Union, and U.S. Government to persuade 

and support Ukrainian authorities to enact serious energy sector reforms. 

23

These have been met generally by lip service, even as fundamental conditions continue to deteriorate in the country. It amused me to read that 2 weeks ago there 

was a conference in Kyiv on ‘‘Natural Gas and Ukraine’s Energy Future’’ conducted 

by a well-known international energy consulting firm and attended by senior 

Ukrainian officials. I dare say that most Ukrainian energy experts could have written the policy recommendations by themselves without any foreign help—they have 

heard them so many times. 

These recommendations basically come down to modernizing the business practices of this large and nontransparent sector of the Ukrainian economy, which has 

served as an exclusive playground for Ukrainian leaders for the past 20 years. This 

means the end of rent-seeking that leaks billions of dollars per year; transparent 

and fair rules of the game for investors that do not favor politically connected interests; and above all energy pricing reform. Assuming the right business conditions, 

Ukraine possesses sufficient conventional and renewable energy potential, and scientific and engineering skills to both increase its domestic energy production and 

to significantly improve its energy efficiency. 

Foreign investment can also help in this regard. However, to date, foreign investors have not been met with fair access to geologic data, open and transparent 

tender process, or internationally standard business terms. What small foreign operators who have ventured into oil and gas production and achieved minor success in 

Ukraine have been met with corporate raids, absence of rule of law, capricious regulations, and other hostile conditions. 

Instead of fundamental reform and the immediate benefits that can be achieved, 

this UkrainianGgovernment and its predecessors would rather talk about fanciful 

projects that are 5 years or further away in the future, such as shale gas or other 

unconventional gas production, liquefied natural gas imports, and offshore exploration—none of which can possibly succeed without energy reform. 

At best, this is a misplacement of policy priorities. At worst, it is deliberate misdirection in order to change the topic and to divert attention away from current and 

future mischief in the energy sector. 

For the moment, Russia and Ukraine are supposedly at an impasse in their gas 

price negotiations, after the disastrous decision President Yanukovych and his government made on gas agreement with Russia in Kharkiv in April 2010, soon after 

his ascendency to the Presidency. Ironically the Kharkiv agreement essentially confirmed and locked his new government into the terms of the agreement made by 

then-Prime Minister Yulia Tymoshenko and Prime Minister Vladimir Putin in January 2009, the unfairness of which she is currently accused and jailed. 

The most likely scenario is an agreement will be reached soon between Russia 

and Ukraine on gas, perhaps before Russia’s Presidential election in March, that 

cedes partial control and/or ownership of Ukraine’s international gas transit system 

to Gazprom in exchange for another so-called discount on gas pricing. Concessions 

on penetration into Ukraine’s domestic gas market may also be made to Gazprom 

or its chosen middleman company. 

Despite such an agreement, Russia will likely continue to progress the South 

Stream pipeline as important for its own interests or at least hold it in reserve. Russia may expect to gain full control of the gas transit system over time—as Ukraine 

continues to mismanage its energy sector and pile on gas debt to Russia—similar 

to what it has already accomplished in Belarus. 

The result of this scenario is that Ukraine becomes an energy appendage of Russia’s. What is the geopolitical significance for the U.S. and Europe of this possible 

outcome I leave to others more expert on such subjects on this panel and to subsequent questioning by the committee, as I prefer to stay within my competence in 

energy. 

I would offer one recommendation: If the United States and our European allies 

care about Ukraine’s energy vulnerability and its negative impact on the region, 

then it must address the policy remedies not only to Ukrainian leaders, but also 

publicly to Ukrainian society. Ukraine has a vibrant civil society, an educated public, and relatively free press for post-Soviet space. Speaking privately to political 

leaders about urgently needed energy reform has proven ineffective in the past and 

may even enable their bad behavior. It is time we invest in a direct dialogue with 

the Ukrainian people if we believe we have a stake in the energy health of this important country.

Senator SHAHEEN. Thank you very much, Mr. Chow. I do not 

think anybody would describe you as a simple energy analyst. 

I want to go back to this question of the imprisonment of former 

Prime Minister Tymoshenko. I mentioned it in my opening stateVerDate 0ct 09 2002 13:46 Jul 26, 2012 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6602 S:\HEARIN~1\112THC~2\2012IS~1\020112-A.TXT BETTY
24

ment. Ambassador Pifer, you mentioned it and Mr. Wilson mentioned it as well. 

I also want to point out that the subcommittee did engage the 

Ukrainian Embassy here in Washington. As I mentioned, the 

Ambassador is here, and they submitted a letter to me relative to 

some of the issues that face the United States-Ukrainian relationship. I appreciate their thoughts, and I want to ask the panelists 

about one of the points raised in the letter from the Embassy. 

The letter suggests that political issues should be separated from 

legal issues and that attempts to link the Tymoshenko case to 

Ukraine’s European aspirations are artificial. And I would like to 

ask both Ambassador Pifer and Mr. Wilson if you think it is possible to separate the two or how continued integration into the EU 

is going to be viewed as long as former Prime Minister Tymoshenko remains in prison. And I will ask you if you would begin, 

Ambassador. 

Ambassador PIFER. Thank you. I think that is an excellent 

question. 

It first gets to the point—and I think you may hear a little bit 

more on the second panel about the specifics of the charge, but it 

is a charge of abuse of power for her conclusion in January 2009 

of a contract with Russia for a gas sale. And the view of most outside observers is this was a political decision. You cannot and you 

should not be criminalizing those types of political decisions. And 

it opens up sort of a Pandora’s box, as Mr. Chow said, questions 

about the Kharkiv agreement. Could somebody then look back and 

say, well, does that agreement open up the same types of questions? And I think it is this. 

But it is also not just the case of Ms. Tymoshenko. She is one 

of probably a dozen former senior members of the government 

under President Yushchenko and Prime Minister Tymoshenko who 

have also been arrested and charged on similar charges that do not 

appear to be well based. 

So I think this is the basis of the concern, both as expressed by 

the European Union and the U.S. Government, that the judicial 

system in Ukraine is being manipulated for political means in a 

way that we really haven’t seen happen before in Ukraine’s 20 

years of independence. And I think as long as that continues, that 

will be and should be a significant barrier to Ukraine’s effort to 

draw closer to Europe because ultimately if you want to be a full 

member of Europe and a member of the transatlantic community, 

you have to accept democratic values, and what we are seeing with 

regard to Ms. Tymoshenko and other former opposition or other 

former government leaders is not consistent with those values. 

Senator SHAHEEN. Thank you. 

Mr. Wilson, do you want to add to that? 

Mr. WILSON. Madam Chair, I would endorse what Ambassador 

Pifer just said, and add to that, that I think the argument of the 

need to disentangle the political from the legal is frankly disingenuous. What we are seeing right now is the distortion of the legal 

for political purposes, and I think that is pretty clear to everyone 

who has paid attention to this particular case, but also as Ambassador Pifer says, this case is sensational and it is a human rights 

25

issue, but it is also illustrative of a broader pattern that raises genuine, deep concerns. 

The second part of this, I think, in response to the comments 

that you conveyed, it represents on the Ukrainian side a fundamental misunderstanding of what it means to draw closer to the 

European Union to join Europe. At the end of the day, accession 

talks to the EU—yes, there is a long process. In these association 

agreements, there are lots of technical negotiations. There is a 

technical aspect to it. But that is not the purpose. 

At the end of the day, this is about moving closer to a community 

of shared values, shared norms based on democracy, human rights, 

rule of law, and democracy. And if the Ukrainian Government does 

not understand the connection between the values issues and the 

technical issues they are negotiating in an agreement, then there 

is a fundamental misunderstanding of what it means to become 

part of Europe. 

Senator SHAHEEN. That is my followup. Do you think the people 

around Yanukovych understand that, that really you cannot separate the two? 

Mr. WILSON. From their actions, it does not imply that that is 

the case. My sense, from watching the situation, is that there is 

some merit, political merit, on the part of the President to be seen 

as having made more progress in the negotiations with the European Union than his predecessors. And in the technical sense, 

Ukraine has advanced in those negotiations. But it is not clear to 

me—I think that that fuels a domestic purpose of being seen of 

checking the box, making progress with Europe, but not a fundamental understanding or commitment to what is behind that and 

what it represents. And I think what we are seeing play out over 

the Tymoshenko trial is at the end of the day an unwillingness to 

make that connection and to take the tough choices that are 

required to actually give meaning to many of these technical agreements. 

Senator SHAHEEN. And can you both comment on what kind of 

an impact both the imprisonment of Tymoshenko and other former 

officials has on the interest in international investment and business investment in the country? 

Ambassador. 

Ambassador PIFER. I think, again, to the extent that this raises 

questions about the Government of Ukraine’s readiness to observe 

the rule of law, it raises questions in the minds of Western companies and American companies that are looking to invest and do 

business in Ukraine. And I know from my own 3 years there back 

at the end of the 1990s, Ukraine at that time—and I think it is 

a bit better, but it is still not an easy environment. You have complex tax regulations, very difficult customs rules, often applied in 

an arbitrary manner. 

Unfortunately, the court system in Ukraine is to the point where 

I think very few Western companies have any confidence that if 

they went to court, they would actually have the chance of a fair 

outcome. And again, what we see with the manipulation of the 

judicial system now against political opponents, it only feeds into 

that disaccreditation of the judicial system in Ukraine. So this, I 

think, has a bigger impact. It is not just about the rule of law with 

26

regard to democracy, but it does raise questions in the minds of 

investing companies that are looking at Ukraine about whether 

that is the right place to go, particularly when they have lots of 

other opportunities around the world. 

Senator SHAHEEN. And, Mr. Chow, you talked about the many 

challenges facing the energy sector in Ukraine. Is this something 

that as companies who are interested in the energy sector in the 

Ukraine look at a potential future there? Do you think this is 

something that deters them as well? 

Mr. CHOW. It certainly is a factor. I mean, oil companies follow 

geology first. But then you look at the investment conditions under 

which you might have to operate. So, for example, if you were to 

invest and hopefully be successful in producing gas in Ukraine, 

what access would you have to customers? What access would you 

have to pipelines? Would you be held for ransom along the way? 

What gas price might you be able to get in the domestic market, 

never mind the right to export it? All these are undetermined, 

deliberately murky, and unpredictable. So even if the geology is 

good, you are likely to discount your bid on the basis that the investment conditions are risky. 

So does that mean that no oil company would come knocking on 

Ukraine’s door? Every time Ukraine has a new government, oil 

companies come knocking on the door, and inevitably they have 

been disappointed in the past. 

You will see there is a bid round coming up, I think, to be announced on February 22, very soon. There are some oil company 

interests in it, and I have spoken to some of them. But how do you 

assign a value to an opportunity when the fundamental investing 

conditions are so shaky? 

Senator SHAHEEN. Thank you. 

My time is up. Senator Barrasso. 

Senator BARRASSO. Thank you very much, Madam Chairman. 

Both to Mr. Wilson and Mr. Chow. At the opening of the Nuclear 

Security Summit in Washington 2 years ago, about April 2010, 

there was an agreement reached where Ukraine would eliminate 

its entire stock of highly enriched uranium by March 2012. So it 

is coming up in the next month. With the summit quickly approaching, could you tell us what kind of progress Ukraine has 

made regarding the disposal of all of its highly enriched uranium 

and where we are with that and how you see things coming in 

terms of this March deadline? 

Mr. WILSON. This was very much a significant outcome of that 

Nuclear Security Summit and a major commitment on Ukraine’s 

part to fully eliminate highly enriched uranium, a major nonproliferation objective for our country. 

There has been significant progress in implementing the agreement. There were some delays, but many of the interim markers 

have been met and I think they remain on track in theory to try 

to meet a March deadline. 

However, the concern I have related to that is the perception in 

Ukraine that action and movement on an issue that is a nonproliferation objective for the United States has the potential to 

buy them a free pass on some of these democracy and human 

rights issues. So the challenge for U.S. policy in managing the 

27

highly enriched uranium issue is to underscore our intent or commitment to try to follow through on the agreements the Ukrainian 

Government has made, but that does not remove Ukraine from 

expectations in meeting rule-of-law issues at home. 

Senator BARRASSO. Mr. Chow and then Ambassador Pifer. 

Mr. CHOW. I do not have a whole lot to add. I stipulated that I 

am a simple oil and gas guy and not really competent on fissile 

materials. 

I would add, though, that the rest of Ukraine’s energy sector, 

whether you are talking nuclear power, powerplants, fuel supply to 

those powerplants, as well as the oil industry, are burdened with 

the same shadowy business practices that I highlighted on gas. So 

there is reason to seek the most transparent regime possible to 

make sure that the pledges made by Ukrainian authorities are actually met. 

Senator BARRASSO. Mr. Ambassador, anything else to add on 

that? 

Ambassador PIFER. I would just add briefly. I think Ukraine, in 

fact, does have every incentive to meet that agreement because as 

part of the arrangement, U.S. Government assistance, provided 

mainly by the Department of Energy, is helping Ukraine convert 

its reactors so that they can operate on low-enriched uranium in 

a more modern way. So there is actually an advantage to Ukraine 

in completing that deal. 

Senator BARRASSO. I want to move to the IMF. In July 2010, $15.5 billion stand-by loan approved by the IMF for Ukraine. The 

latest tranche of the loan is suspended. IMF is requesting Ukraine 

make some changes. Specifically they have requested that Ukraine 

address its domestic gas price. Can you explain any of the major 

concerns that are happening there and the impact this is having 

on Ukraine, and with the parliamentary elections coming up in the 

fall, do you see the political will needed to make the changes that 

the IMF may request? Mr. Wilson, I do not know if you want to 

start. 

Mr. WILSON. I would say two things in response to that. 

One, I do not see the political will in addressing sort of this core 

issue of the domestic gas price. That is what Mr. Chow has talked 

about, one of the core issues that has a whole ream of ramifications 

for corruption, sovereignty, security issues. I am very skeptical that 

the Ukrainian Government will be in a position to move on the 

domestic gas price issue. 

At the same time, I think some of their efforts to respond to the 

financial crisis previously worked on the IMF side of this have 

reinforced their political instincts because they have taken some 

difficult decisions that have not been popular in the public. You can 

point to a substantial drop of political support in the east because 

of raising the retirement age, for example. So in some respects, I 

think some of their efforts on the economic front have reinforced 

their inclination to take measures on the political front because 

they feel vulnerable and exposed headed into parliamentary 

elections. 

Senator BARRASSO. Anyone want to add anything to that? 

Mr. CHOW. I was a critic of the Fund—that is, IMF—in 2009 

when I thought that they were being too lenient to the thenVerDate 0ct 09 2002 13:46 Jul 26, 2012 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6602 S:\HEARIN~1\112THC~2\2012IS~1\020112-A.TXT BETTY
28

Tymoshenko government. If the Orange forces needed tough love at 

that time, my position is that this government needed strict compliance before any money is given to them. We have already seen the 

first tranche delivered by the IMF. The second tranche continues 

to be delayed for the reasons that Mr. Wilson gave, as well as the 

upcoming parliamentary elections in October. I am highly skeptical 

that any positive move would be made soon. 

Ambassador PIFER. I would agree with my two colleagues, 

because one of the primary conditions for the next tranche of the 

IMF loan is a raise in domestic gas prices which would hit a broad 

portion of the electorate. I do not see this government as prepared 

to do it in the runup to a parliamentary election. 

Senator BARRASSO. Then I want to move to integration with the 

European Union and the accessment agreement with Ukraine is 

stalled. So I am curious about long-term prospects for the integration of Ukraine into the European Union and kind of the requirements and reforms that should the European Union require of the 

Ukraine. If you have any assessment of how you think the people 

of Ukraine feel about joining the European Union. Is it something 

they want, something they are concerned about? Mr. Wilson, if you 

want to start. 

Mr. WILSON. Sure. I think despite the tenor of the testimony that 

you have heard today, I am very supportive of the long-term prospects of Ukraine’s integration into Europe, and I think ultimately 

the vast majority of the Ukrainian population wants to see their 

future as part of the European mainstream. That is what gives me 

confidence at the end of the day there is an element of a check to 

the tendency that we have been seeing, but that has been put completely at risk right now. 

So I think part of the challenge—what has played out in the 

wake of the Orange Revolution, what has played out with this government is an increasing sense of apathy among the Ukrainian 

population, apathy within civil society, which I think is a dangerous precursor to an ability to allow the government to take 

steps without some of those checks and balances. So I think key 

in this is United States policy beginning to be clear, including with 

those that are skeptical in Europe, that as Ukraine takes the right 

steps, as Ukraine restores its democracy and strengthens its free 

market, that really the doors in Europe should be open. 

Senator BARRASSO. Mr. Ambassador. 

Ambassador PIFER. I would just add two observations. 

First, to agree with what Mr. Wilson said, polls over the last several years have consistently showed 55 to 65 percent of the Ukrainian population supports the idea of joining Europe, and primarily 

it is because of the attraction of the economic standard of living 

there. 

The second point on this points up why the democratic backsliding in Ukraine comes at a very bad time because within Europe 

now, I think, you have a lot of questions about how far it should 

expand. And with the eurozone crisis and the internal problems, 

there really is this tendency to look inward. And so the democratic 

backsliding that you have seen in Ukraine over the last 2 years is 

being taken by those countries who want to say we really cannot 

29

think much beyond our borders and to push Ukraine off. So it is 

not playing out at a good time. 

I would guess that had Poland, which held the Presidency of the 

European Union during the last part of 2011—had Poland not held 

that Presidency, I think there would have been a very good chance 

that the European Union would not have gone forward with a summit meeting with the Ukrainians last December. That is because 

the Poles have been one of the countries that have been strongly 

advocating for Ukraine, but I suspect even they may be getting a 

bit frustrated. 

Senator BARRASSO. Thank you. Thank you, Madam Chairman. 

Senator SHAHEEN. Thank you. 

Senator Risch. 

Senator RISCH. Thank you, Madam Chairman. 

Mr. Chow, can you tell me what percent of the electricity is generated in the Ukraine from nuclear energy? Do you know that 

number off the top of your head? 

Mr. CHOW. I do not know that number off the top——

Senator RISCH. Is it significant? 

Mr. CHOW. It is very significant. Fifty percent. I was going to say 

40. So 40–50 percent. So it is a very significant part of electricity. 

Senator RISCH. And what about the remainder of it? Is it coal, 

gas, combination? What is the remainder of it or do you know? 

Mr. CHOW. Power generation by energy source in Ukraine is approximately as follows: 48 percent nuclear, 34 percent coal, 11 percent gas, and 7 percent hydroelectricity. 

Senator RISCH. The other question I would have for any one of 

you—I suppose, Mr. Ambassador, it is probably more in your line. 

The dismantling of the old Soviet Union missile system in the 

Ukraine. Is that completed now? 

Ambassador PIFER. Senator, in 1996, the last of the nuclear warheads that were in Ukraine——

Senator RISCH. I knew the warheads were gone, but what about 

the remainder of the system? 

Ambassador PIFER. All of the ICBM silos have been dismantled. 

All of the bombers have been dismantled. Probably the one piece 

that is still being worked on is the SS–24 missiles have been separated into stages, but they are still working out the way to remove 

the fuel from those missiles. But it has been a very, I think, cooperative effort between the United States and Ukraine. 

Senator RISCH. The reason I ask is, there is an Idaho company, 

I believe, that is involved in that. Thank you very much. I appreciate that. 

Thank you, Madam Chairman. 

Senator SHAHEEN. Thank you, Senator Risch. 

Ambassador Pifer, in December you wrote a very interesting article in the Ukrainian Weekly which argued that Mr. Yanukovych’s 

pursuit of a more authoritarian agenda at home would cause 

disbalance in Ukraine’s foreign policy. I am not quoting you 

exactly, but you point out that actually his current tactics may 

weaken his ability to negotiate with Moscow rather than improve 

that ability. I wonder if you could elaborate on this. 

Ambassador PIFER. I think when you look at Russia, Russia has 

a fairly strong set of goals it wants to achieve vis-a-vis Ukraine. 

30

It wants to keep Ukraine geopolitically in its orbit. It does not want 

to see Ukraine draw closer to NATO or the European Union. It 

wants to have control, including ownership, if possible, of the 

energy transit system through Ukraine. It wants to have Ukraine 

open for Russian business. And I think as we have seen over the 

last couple of years, even when relations between Russia and 

Ukraine improved after the beginning of 2010, the Russians 

remained very hard-nosed negotiators. As early as the summer of 

2010, one was hearing that Ukrainiane officials, including in 

Bankova, where the Presidential administration is housed, were 

becoming very frustrated that the Russians continually push for 

more, push for more. 

So my own estimate is that to the extent that Mr. Yanukovych’s 

policies on democracy mean a weaker relationship with the West, 

he is going to find himself in a more lonely and more difficult position dealing with the Russians, and I think the Russians will use 

that to their advantage. That is, quite frankly, the hope that I have 

because I think Mr. Yanukovych can appreciate that. And my hope 

is—I am not as optimistic as I was maybe 5 months ago, but my 

hope remains that seeing that difficult position without the balance, that that will lead him to conclude that he has to adjust his 

course on democracy to return to the balance, which would be good 

both in terms of Ukraine’s relationship with Europe but also 

strengthen his position vis-a-vis Moscow. 

Senator SHAHEEN. And, Mr. Wilson, do you share Ambassador 

Pifer’s view that Yanukovych understands this and will respond to 

it, or do you think that is part of his political calculation? 

Mr. WILSON. Sort of two points. 

One, first on the Russia side of this, I think there is another 

objective that is in play from Moscow’s part. Vladimir Putin needs 

the experiment of democracy, needs the experiment of the Orange 

Revolution and its aftermath to fail and to be seen as failing to reinforce the narrative to the Russian people that experimentation 

with democracy in the post-Soviet space is dangerous, leads to economic uncertainty, chaos. 

If Ukraine were to succeed, with its democratic experiment—the 

Russians have been taught to think of Ukrainians as their backward cousins. If that were to succeed inside Ukraine, it really challenges the narrative. We used to think that changes in Moscow 

would reverberate throughout the former Soviet space. I think 

today that successful change in Ukraine has a strong likelihood of 

impacting Russia. And so I think that is another factor in play as 

the Russians think about how all this plays out. 

At the same time, I think President Yanukovych is very leery of 

being drawn too close into Moscow’s orbit and has tried to pursue 

sort of equidistance. I think he understands it is not in his interests to be completely under the arms of a returning President 

Putin. Speaking to many of Yanukovych’s advisors, Prime Minister 

Tymoshenko when she was Prime Minister, having Russian leaders 

speak to them with street language Russian as a condescending 

sense conveys to them almost that they are a lower class, has 

inculcated across the Ukrainian political elite, whether from the 

Orange camp or others, a sense of pride in actually being able to 

31

be responsible for their own nation and not wanting to be subject 

to Russia. 

So I think that there are complicated calculations. President 

Yanukovych’s No. 1 priority is to have cheap gas from Russia to 

maintain his own political support in Ukraine, but it gets quite 

complicated beyond that because they understand that there are 

real liabilities to that dependence. 

Senator SHAHEEN. And do the current protests in Russia affect 

those calculations at all, do you think? 

Mr. WILSON. I think they very much impact Vladimir Putin’s calculations and reinforce the sense that success of a free market 

democracy in a post-Soviet country, particularly Ukraine, is a

direct threat and challenge to the narrative and the structure that 

I think has been set up in Russia. 

Senator SHAHEEN. And how do Ukrainians view what is going on 

in Russia? Either you or Ambassador Pifer. 

Ambassador PIFER. Probably with interest, but I think it is somewhat colored by the fact that for a lot of Ukrainians now, there is 

a certain degree, unfortunately, of cynicism about the Orange Revolution, and that was, unfortunately, in the aftermath of the Orange 

Revolution in 2005, President Yushchenko—and I think some of 

the blame also lies with Prime Minister Tymoshenko—is they had 

an opportunity there and they failed to take advantage of that 

opportunity, the result of which is, I think, 5 years later people 

then basically voted for Mr. Yanukovych who had, of course, been 

the one thrown out by the Orange Revolution. So my suspicion is 

that there is still a desire to be closer to Europe and have a more 

democratic society, but unfortunately, it has been colored by an experience that they see as really not having delivered. 

Senator SHAHEEN. Mr. Chow talked about the importance of engaging the Ukrainian public if there were any real reforms going 

to be done to the energy sector. How possible do you think that is 

to really engage the public? 

Mr. CHOW. I think it is wide open honestly. I think Ukraine is 

still, in spite of its problems today, a relatively open society. There 

are organizations with people that we can speak directly to. The 

United States Government has invested 20 years of building up 

civil society organizations in Ukraine. People, as Ambassador Pifer 

alluded to, are very disappointed and disillusioned with this generation of political leaders, and they have good reason to be. But 

that does not mean that we should give up on Ukrainians and give 

up on talking particularly to younger generations of Ukrainians 

about the possibility of change and improvement in their country. 

Senator SHAHEEN. Thank you. 

Senator Barrasso. 

Senator BARRASSO. Thank you, Madam Chairman. 

This is a followup, and they may feel that they have completely 

answered this. Due to the geographic location, the cultural history, 

the aspirations for the future of the people of Ukraine—I believe 

people will continue to search for the right balance in terms of its 

foreign policies. Is there a way for Ukraine to successfully balance 

its relationship with the West as well as Russia? You all alluded 

to that in the last answer. I do not know if there is something else 

you would like to add. 

32

Ambassador PIFER. I do not think it should be, nor does it have 

to be, for Ukraine an either/or choice. Ukraine should be able, on 

the one hand, to have a stable, constructive relationship with Russia, which I think most Ukrainians want. They do not want to have 

difficult relations with the Russians. And Ukraine also can have, 

I think, a strong and growing relationship with Europe and the 

transatlantic community. So it can do both. What is holding it back 

now though, is the decisions that President Yanukovych is making 

regarding democracy within his country, and that is preventing the 

development of the relationship with particularly the European 

Union that might be possible. 

Mr. WILSON. I would just add that part of the challenge here is 

Russia’s approach is a very clear perspective on privileged interests, fear of influence. And in that context, balance does not work. 

If you look at Poland, the Baltic States, by their being able to 

join NATO and join the European Union, once they were safely embedded in the institutions of the transatlantic community, they actually had the stability, the confidence to be able to manage more 

cooperative, constructive relationships with Russia. Without that, 

the Russians were not willing to respect certain limits, respect certain sovereignty. 

And I think that is the challenge that Ukraine will face. When 

will Russian leaders be prepared to honestly treat and think of 

Ukraine as a sovereign, independent nation? And it does not just 

work to be equidistance or to balance. It requires, I think, a greater 

Ukrainian integration into a broader community of shared values, 

interests, and norms to be able to help check some of those Russian 

tendencies and provide the Ukrainians the confidence and the capability to be able to manage a healthy relationship with Russia. 

But right now, I see it very difficult for the Russians opening the 

door being willing to have that kind of healthy relationship. 

Senator SHAHEEN. Senator Risch, any other questions? 

Senator RISCH. No other questions. 

Senator SHAHEEN. I just have one final question. Mr. Wilson, you 

pointed out that one of the tests upcoming will be the parliamentary elections this year. And I wonder if you all could—both you 

and the Ambassador and Mr. Chow, if you have any views as 

well—what concerns you have about seeing those elections go forward in a way that ensures that they are free and fair and what 

can the United States and Europe do to help make that happen. 

So, Mr. Wilson, do you want to go first? 

Mr. WILSON. Madam Chair, I do believe this is a critical issue 

on our policy agenda right now. President Yanukovych was elected 

in free and fair elections that represented the fourth in a series of 

free and fair elections in Ukraine. That is very significant in the 

post-Soviet space. The first election that happened under his 

watch, the local elections in 2010, were seriously flawed. There was 

a real regression in terms of the conduct of elections. This will be 

the first parliamentary elections under his Presidency, and I think, 

first of all, I already have very serious concerns because, despite 

two successful, free and fair parliamentary elections already, the 

ruling party with singular focus decided to pursue a change in the 

electoral code, one that when most analysts look at this mixed system which increases the number of majoritarian seats, it has a 

33

tendency to benefit the ruling incumbent party. So, one, I am 

already quite concerned and skeptical as to why Ukraine needed to 

go through yet another electoral code. It is as if the party in power 

continues to change the rules of the game to support itself each 

electoral cycle. There needs to be continuity and stability in electoral code in Ukraine. 

Second, I think by trying to keep Tymoshenko in prison is trying 

to hamstring the opposition in this effort. 

And third, I think part of the key issue right now—part of the 

United States—its support with Europe that was so valuable in the 

runup to the Orange Revolution was our support to Ukrainian civil 

society organizations that could do election monitoring, that could 

conduct exit polls, that could manage parallel vote counts, that 

were part of the fabric to do media monitoring. I think right now 

we are not as far along as I would like to see us. I think USAID 

should already be committing its grants, already be pushing this 

money out to help support Ukrainian civil society organizations, as 

well as IRI, NDI, other American actors, to set the right table for 

the elections this fall. The default option is that these are going to 

be dirty, they are going to be tough, and they are likely to be tilted. 

But I do think Ukrainian actors have been involved in checking 

these practices in the past, and I think United States and European policy needs to be doing what it can today to maximize their 

capability to check that in the fall. 

Senator SHAHEEN. Ambassador. 

Ambassador PIFER. Two points which really build on what Mr. 

Wilson said. 

First of all, there needs to be—and I think the United States and 

European Union are already providing this message, but there 

needs to be just a continuous message hammered home on Kiev of 

the importance of democracy within Ukraine for Ukraine’s relationship with the West. We must leave no doubt in the minds of Mr. 

Yanukovych and the Ukrainian leadership that if these elections 

are bad elections, there will be significant consequences for the 

relationship that they hope to build with Europe and the United 

States. 

And then I would also agree with Mr. Wilson, what we have seen 

in Ukraine is actually a very heartening development in terms of 

civil society organizations. Already 10 years ago, the Ukrainians 

had organizations that were very well set up to monitor elections. 

So, for example, in preparation for their 2002 parliamentary elections—and I was still in the Government. I had a chance to visit 

Kiev. I mean, they had one group that was monitoring electronic 

media, one group monitoring print media, one group that was organizing exit polls. So there are organizations on the ground in 

Ukraine that know how to do this, and they are going to be a lot 

smarter than American or European observers in catching fraud. 

So we ought to be directing assistance to them so that they can do 

the job that we know they can do. 

Senator SHAHEEN. Thank you. Yes, I was actually in Armenia for 

the parliamentary elections in 2003, and there were a number of 

Ukrainian observers there and they were very sophisticated. 

Mr. Chow, did you want to add anything to that? 

Mr. CHOW. I will allow myself to venture beyond my competence. 

34

[Laughter.] 

I have observed, as a private citizen, a couple of elections in this 

part of the world before. And I will just say, to underscore what 

my colleagues have already mentioned, that the messaging from 

us, the West, to the authorities and to the Ukrainian people need 

to be starting now and not on election night. Elections are not only 

rigged on election night, as you well know. Lots of conditions, rules 

of the game are already being implemented now. By the time we 

object the day after the election, it will be too late to have an impact. So if we want to have an effect, then we ought to be saying 

something sooner rather than later. 

Senator SHAHEEN. Thank you very much. I think we all share 

that. 

As we are closing this panel, I want to just make clear for the 

record that the letter that I referenced earlier from the Embassy 

will be submitted for the record on this hearing. 

And I also have another report that I will be submitting called 

‘‘Open Ukraine.’’ I had the opportunity in December to host an 

event for the Johns Hopkins Center for Transatlantic Relations 

called ‘‘Open Ukraine’’ that produced a policy report outlining some 

important recommendations for both the United States and 

Europe. And so I want to make sure that that report is also submitted for the record. 

Senator SHAHEEN. So thank you all very much for joining us. We 

very much appreciate your views. And I will, at this point, close 

this first panel and ask Ms. Tymoshenko if she would join us at 

the table. 

On our second panel, we have a special guest from the Ukraine, 

Ms. Eugenia Tymoshenko. Ms. Tymoshenko is a graduate of the 

London School of Economics, a businesswoman and restaurateur. 

She has previously worked for the International Development Fund 

and is the Honorary President of the Festival of Arts for Orphans 

and Disadvantaged Children in Ukraine. 

Today she is here on behalf of her mother, former Prime Minister 

Yulia Tymoshenko. Eugenia has been devoting her time to fighting 

for the release of her mother from prison. We are very pleased to 

have you here today. We look forward to your testimony. 

And I would just point out that I understand you have an important appointment shortly. And so we will try not to keep you too 

long. Thank you very much for being here. 

STATEMENT OF EUGENIA TYMOSHENKO CARR,

KIEV, UKRAINE 

Ms. TYMOSHENKO CARR. Thank you, Senator Shaheen and distinguished members of the committee, ladies and gentlemen. Thank 

you for granting me, a citizen of Ukraine, the privilege of coming 

here to speak to the Senate today and, through you, to the citizens 

of America. It is such an honor for me to be here in this hallowed 

place, but I know that you are truly honoring my country, my 

mother, and other political prisoners by inviting me here to discuss 

this issue in this moment of grave danger for Ukrainians’ liberty, 

even for our independence as a nation. 

35

Thank you for being able at last to speak of injustice in these 

cases of political repression and to be heard and to find the solution. 

I am very glad to see that you are from New Hampshire, Senator 

Shaheen. My mother has always admired your State motto: ‘‘Live 

Free or Die.’’

I want to discuss what is happening in Ukraine today and given 

the daily threats of what is left of our democracy. I was able to witness the court proceedings and the show trial that happened in 

Ukraine during the repression where actors such as judges and 

prosecutors were acting as puppets of the President with no regard 

to the rule of law. I continue to witness this cynical miscarriage of 

justice every day following my mother’s case and being able to see 

her in prison. 

I want to begin with the sad and amazing words taken from the 

Internet petition to free my mother filed by Bishop Paul Peter 

Jesep where he quoted the French thinker Montesquieu, and it 

says: ‘‘There is no greater tyranny than that which is perpetrated 

under the shield of law and in the name of justice.’’

My mother has been illegally imprisoned, maltreated, and 

humiliated for 6 months by the regime which is trying to break 

her. Despite the immense psychological pressure and constant, unbearable pain, she did not break. Her spirits are high. I can say 

that emphatically, but her health is failing. When I see her, I must 

lift her from her bed. She can barely walk. Yet, she still works and 

not only to fight all the legal mud that is being thrown at her, but 

to unify all of Ukraine’s democratic forces to challenge President 

Yanukovych and the repressive clan that rules with him. 

My mother went into politics and took up the great task to free 

her country of injustice, absence of rule of law, and corruption left 

from Soviet past so that we young Ukrainians would not need to 

devote our lives to do the same. One of the major failures was and 

now remains corruption. She chose to go against the system, refused to be part of corrupt schemes, and ended up facing the system alone, letting it destroy her business, putting her, her family, 

and friends behind bars on falsified charges. 

That happened 10 years ago when my mother was Vice Prime 

Minister for Energy, and when she managed to remove corruption 

in the energy sector and restored financial functioning in this sector that is still intact. When the country’s leadership resisted her 

reform efforts and imprisoned her for the first time, she was freed 

and organized massive protest movements. These protests later 

grew into the Orange Revolution where she became an icon for 

democratic victory in Ukraine. 

While Prime Minister, even though she had limited control but 

big responsibilities, she fought for major reforms and country’s 

well-being. Despite her transparent efforts, she was many times 

betrayed for her refusal to compromise country’s well-being for her 

own. After 2009 gas negotiations with Russia, when she had 

removed the corrupt gas trading middleman, RosUkrEnergo, she 

brought the transparency back into the gas trade, but became 

enemy No. 1 to those who were trying to monopolize the energy 

market and who are in power now. 

36

What we are witnessing in Ukraine is such a twisting of the rule 

of law that it is not possible to distinguish illegality from legality. 

It is hard to see the line between the law and abuse of law. 

My mother is imprisoned under an old Soviet-era criminal code 

of 1960 that criminalizes political decisions. It is important to know 

that there was no accusation or evidence introduced in the court 

that my mother had personally gained from negotiating the gas 

deals that ended the European gas crisis back in January 2009. 

Politically motivated charges, of which my mother was found 

innocent by Supreme Court 6 years ago, have also been reopened 

with no legal basis. The statute of limitations is also ignored. They 

have been reopened for only one reason, to try to destroy her reputation in the EU and USA and to put more psychological pressure 

by prosecuting my father, my grandfather, her colleagues, and 

friends. 

Her cell in Kachanivska prison outside of Kharkiv, far from her 

family and friends, is not a dungeon, as you may be relieved to 

know. But the Yanukovych regime does not need to use medieval 

surroundings to get medieval results. Instead, they are using the 

modern techniques of sleep deprivation and intimidation to try to 

break her. This includes 24 hours lit room and 24-hour video surveillance. Lately they have introduced a close-up surveillance camera so that they can see what she is writing to me, to her husband, 

to her supporters around the world. 

They say it is done for her protection, but I doubt it. When she 

fell unconscious for 2 hours due to a sudden, mysterious loss of 

blood pressure, no help came, as her cellmate tried to revive her 

for 20 minutes. They waited for a doctor to come, and when the 

doctor arrived, they did not even call an ambulance. She could have 

died that night. But we only found out about this incident 3 days 

later from her and her cellmate. Later, they say they would lose 

the video archive. It is clear why she stopped trusting the ministry 

doctors and why she refuses to see them and to make their false 

diagnosis. 

Many other outrageous breaches of her rights, the rule of law I 

can mention, like illegal second arrest delivered by the court that 

took place in her cell and lasted for 12 hours when she was bedridden and in pain. It is illegal in Ukraine to have a court hearing 

in the cell and, more than that, to arrest the person for the second 

time. There was also impossibility for her defense to build up the 

strategy and to defend her in the proper way. 

We are told that they plan to move her now to a new cell with 

other seven people, make her to wear uniform, and work despite 

her illegal sentence and constant pain. 

I have no doubts that the verdict against my mother was sought 

and approved by President Yanukovych. She is, according to recent 

polls, his main political opponent and more popular than him. 

But I do not want you to think that this is only about my 

mother. It is not. Others are being repressed and unjustly imprisoned. 

Her former colleague, Minister of Interior Yuri Lutsenko, has 

been imprisoned for over a year on charges that would be laughable if they were not so tragic. He is charged with hiring a driver 

past the retirement age and of spending $2,000 over budget to 

37

mark Ukraine’s national police day. I do not know American political practice very well, but I cannot imagine a former Cabinet Minister be jailed for over a year without a trial on such charges. 

And there are others. The son-in-law of Supreme Court chairman 

was arrested on the day his wife gave birth in order to intimidate 

that Justice into resigning. Former Acting Minister of Defense, 

Valery Ivashchenko, has been imprisoned for almost 2 years with 

his health severely deteriorating. They are all repressed and 

humiliated because of their political views. They courageously stood 

up to the regime and the injustice and fear it is sowing. 

The situation with political prisoners is just the tip of an iceberg, 

and the situation is direct evidence of a much graver problem, 

political crisis that the regime is creating by continuous abuse of 

criminal justice system. Politically motivated prosecutions of 

former government officials, civil society activists, and prosecutions 

of human rights defenders ignore the rule of law. The bottom line 

is that no law enforcement agency dares to make a move to 

prosecute the political opposition without the instruction of the 

President. 

I believe that the current situation, as described in the recent 

European Parliament and the Parliament Assembly of the Council 

of Europe resolutions, require urgent action. 

Numerous legal infringements of the European Convention of 

Human Rights were listed and explained in three reports of the 

Danish Helsinki Committee, which was commissioned by the EU, 

and found the truth behind the political so-called criminal cases. 

Yanukovych spent millions of U.S. dollars hiring American audit 

companies and hoping that he can find traces of her corruption. 

Hundreds of her ex-coworkers were summoned for questioning. 

They were looking hard but never found and will never find. 

The current government’s activities are not only ruining the 

image of Ukraine and Ukraine as a united nation, but also the 

profitable sectors of the economy that become paralyzed and eventually abandoned when the rule of law is ignored. Successful people 

prefer to leave Ukraine and our population is declining. 

Indeed, not even our constitution has survived Yanukovych’s contempt for law. To grab more power for himself, he simply junked 

it. His first breach of the constitution was signing a shameful 

Kharkov agreement with Russia which was nothing but a concession of Ukraine’s national interests. 

I know that Ukraine must seem like a faraway place and that 

our problems must also seem distant from the concerns of Americans at this difficult time for America. But just as no man is an 

island unto himself, no democracy is an island. When one nation 

is allowed to be hijacked, all democracies are threatened. 

I am here today to answer your questions, Senator Shaheen, but 

also to plead that America do all that it can to preserve democracy 

in my country. My mother’s plight has united many great, strong 

nations and amazing people, true heroes of our time to support 

political prisoners in Ukraine and fight for their release. It is paramount for Ukraine to have free and fair elections this fall, but it 

would be impossible without major opposition leaders. 

I know my mother strongly believes in democratic future of 

Ukraine and has consistently fought for it and continues to do so 

38

despite the risk for her life. Yanukovych wants her to write a letter 

publicly asking forgiveness and admitting her sins for him to pardon her. This will never happen as she never committed a crime, 

even according to the old criminal code. She will never let Ukraine 

fall back into the Soviet past. She is strong enough to do it and to 

win the elections if she is allowed to run. She has already succeeded in bringing fractioned opposition into one unified front. 

The enemies of democracy and freedom should not be welcome in 

a democratic society unless they correct their mistakes. I ask you 

to consider all possible ways to influence and to explain to them 

the consequences of their actions. But most of all, I ask you to 

speak out loudly and clearly so that the people of my country do 

not feel abandoned and lose hope. 

I want to thank you again and thank present administration, 

Secretary Clinton and President Obama for the support, but also 

mention that I really appreciate the statement made, according to 

the Associated Press, by the head of the security, by the head of 

the intelligence, Mr. Clapper, who said that democracy in Ukraine 

is under siege, and the charges against my mother and other political prisoners are politically motivated. And I just wanted to add 

that he is right in his statement. 

Thank you very much for your attention. 

[The prepared statement of Ms. Tymoshenko Carr follows:]

PREPARED STATEMENT OF EUGENIA TYMOSHENKO CARR

Thank you, Senator Shaheen. Thank you for granting me, a citizen of Ukraine, 

the privilege of coming here to speak to the Senate and through you, to the people 

of the United States. It is such an honor for me to be in this hallowed place, but 

I know that you are truly honoring my country and my mother by inviting me here 

to discuss with you this moment of grave danger for Ukraine’s liberty, and our independence as a nation. 

I am very glad to see that you are from New Hampshire, Senator Shaheen. My 

mother has always admired your State motto: ‘‘Live Free or Die.’’

I hardly know where to begin in discussing what is happening in Ukraine, given 

the daily threats to what is left of our democracy. Perhaps I ought to begin with 

the sad and amazing words taken from the Internet petition to free my mother, filed 

by Bishop Paul Peter Jesep, where he quoted the French thinker Montesquieu, and 

it says, ‘‘There is no greater tyranny, than that which is perpetrated under the 

shield of law and in the name of justice.’’

My mother has been illegally imprisoned, maltreated, and humiliated for 6 

months by the regime which is trying to break her. This didn’t break her. Her spirits are high, I can say that emphatically, but her health is failing. When I see her 

I must lift her from her bed; she can barely walk. Yet she still works, and not only 

to fight all the legal mud that is being thrown at her, but to unify all of Ukraine’s 

democratic forces to challenge President Viktor Yanukovych and the repressive clan 

that rules with him. 

My mother went into politics and put on her small shoulders the great task to 

free her country of injustice, absence of rule of law, and corruption left from Soviet 

past, so that we, young Ukrainians, would not need to devote our lives to do the 

same. She, unlike many young entrepreneurs in newly independent Ukraine, managed to build a big, successful corporation that helped restore the lost production 

and trade ties between ex-Soviet states. By doing that she uncovered most major 

failures of the old system. One of the major failures was and now remains—corruption. She chose to go against the system, refused to be part of corrupt schemes and, 

ended up facing the system alone, letting it destroy her business, putting her, her 

family, and friends behind bars and again on falsified charges. 

Ten years ago, when my mother was Vice Prime Minister for the Energy Sector, 

she managed to remove corruption in oil, electricity, and gas trading and restored 

financial functioning in this sector. When the country’s leadership resisted her reform efforts she organized massive protest movements. These protests later grew 

39

into the Orange revolution, which she helped to lead and supported a person for 

President she believed would lead the country into democratic victory. 

While Prime Minister, even though she had limited control but big responsibilities, she fought for major reforms and country’s well-being. After she had removed 

the gas trading monopolist, RosUkrEnergo, she became enemy number one, to those 

who were trying to monopolize the energy market and who are in power now. She 

ended up illegally imprisoned, convicted, and tortured for not playing by the rules 

of their game, not complying with their orders that were detrimental to Ukraine. 

Her cell in Kachanivska prison outside of Kharkiv, far from her family and 

friends, is not a dungeon you may be relieved to know. But the Yanukovych regime 

does not need to use medieval surroundings to get medieval results. Instead, they 

are using the modern techniques of sleep deprivation and intimidation to try and 

break her. They won’t succeed. They are able to deny her a restful night’s sleep 

because her cell is kept lit and she is filmed and watched 24 hours a day. Lately, 

they have introduced a closeup surveillance camera so that they can see what she 

is writing to me, to her husband, to her supporters and to the world. 

They say it is done for her protection but I doubt it. When she fell unconscious 

in her cell due to a sudden mysterious loss of blood pressure, no help came, as her 

cellmate waited for 20 long minutes for a doctor to come in, who didn’t even call 

an ambulance. She could’ve died that night. We found out about the incident 3 days 

later from her and her cellmate. Later, they would ‘‘lose’’ the video archive and 

would make her cellmate rewrite her witness statement. 

You will not be surprised to learn that since her incarceration and the constant 

pressure the regime has placed on her, my mother has developed serious health 

problems, which have gone untreated. The regime will say that this is my mother’s 

own choice. But can anyone seriously expect her to trust her physical well-being to 

a regime that directs doctors to falsify their diagnoses. Her only request is to be 

examined by her own doctors, or independent doctors from abroad. That does not 

seem unreasonable. People who keep her behind bars say: ‘‘Of course, yes, yes,’’ then 

nothing happens. But no one should be surprised by that. As European leaders have 

learned all too well over the past year, Yanukovych can’t be trusted to keep his 

word. 

The intimidation that my mother is enduring comes from the fact that the regime 

and its prosecutorial henchmen keep piling criminal charge upon criminal charge, 

so that my mother and her small team of lawyers are simply overwhelmed. Against 

all legal norms, she is interrogated in her cell, sometimes for 12 or more hours consecutively. She is given inadequate time to review the documents that will be used 

against her in the next court hearing. It was clear at the first trial and at the 

appeal court that my mother was convicted before the evidence was heard. She was 

even denied a closing statement and evidence that would have proven her innocence 

was not admitted. Over 100 other motions made by the defence team were denied. 

I have no doubts that the verdict against my mother was sought and approved 

by President Yanukovych. She is, according to recent polls, his main political opponent and more popular than him. 

But I don’t want you to think that this is only about my mother. It is not. Others 

are being repressed and unjustly imprisoned. 

Her former colleague, Minister of Interior Yuri Lutsenko, has been imprisoned for 

over a year on charges that would be laughable if they were not so tragic. He is 

charged with hiring a driver past the retirement age and of spending $2,000 over 

budget to mark Ukraine’s national police day. I don’t know American political practice very well, but I can’t imagine a former cabinet minister be jailed for over a year 

without trial on such charges. 

And there are others. The son-in-law of a Supreme Court Chairman was arrested 

on the day his wife gave birth, in order to intimidate that justice into resigning. 

Former Acting Minister of Defence Valery Ivashchenko has been imprisoned for 

almost 2 years, with his health severely deteriorating. They are all repressed and 

humiliated because of their political views. They courageously stood up to the regime and the injustice and fear it is sowing. 

Unfortunately Ukraine turns into an authoritarian regime with leaders of the 

opposition sitting in jail. 

What we are witnessing in Ukraine is the continuous abuse of the criminal justice 

system. Politically motivated prosecutions of former government officials, civil society activists and prosecutions of human rights defenders ignore the rule of law. I 

believe that the current situation, as described in the recent European Parliament 

and Parliamentary Assembly of the Council of Europe resolutions, requires urgent 

action. 

To say that prosecution of the opposition is just a problem of the outdated legislation is to miss the obvious. It’s really not so much the law at fault but how it is 

40

enforced. Ukrainian authorities cynically blame the law while everyone knows that 

the prosecution system and the judiciary is under the complete control of the governing party via the so-called High Council of Justice, which is controlled by President Yanukovych. No law enforcement agency dares to make a move to prosecute 

the political opposition without instruction from the President. 

Numerous legal infringements of the European Convention of Human Rights were 

listed and explained in three reports of the Danish Helsinki Committee, which was 

commissioned by the EU, to find the truth in the political, so-called ‘‘criminal’’ cases. 

This shows a systematic prosecution of the opposition or people close to it. And my 

mother is the main target. 

What we are witnessing in Ukraine is such a twisting of the rule of law that it 

is impossible to distinguish illegality from legality, hard to see the line between law 

and abuse of law. My mother is imprisoned under an old Soviet Era Criminal code 

of 1960, that criminalizes political decisions. Even as out-dated as they are, they 

have been applied illegally in her case. It is important to know that there was no 

accusation or evidence introduced in the court that my mother personally gained 

from negotiating the gas deals and ending the European gas crisis in January 2009. 

Two letters filed by acting Minister of Justice, Mr. Lavrynovich, and ex-Prosecutor 

General, Mr. Medvedko, state the same. The state gas trading company ‘‘Naftogas’’ 

has recently issued a statement, that calculation of losses that my mother is 

charged with, was done under severe pressure from the General Prosecutor’s Office. 

Politically motivated charges of which my mother was found innocent a decade 

ago have also been reopened, with no legal basis. Past Supreme Court rulings are 

being ignored. The statute of limitations is also ignored, as some of the charges now 

being brought against my mother for her business activities stem from 15 and 16 

years ago. They have been reopened for only one reason, to destroy her reputation 

in the EU and the USA. 

These new cases can take care of a few other problems for Yanukovych’s government. She will stay in jail despite the European Court of Human Rights’ decision, 

if it is in her favour. They put more psychological pressure on her by prosecuting 

and charging her husband, her father-in-law, and ex-colleagues. 

Yanukovych and his team are trying to do everything possible to charge my 

mother with corruption. They hope the smallest hint of corruption will confuse 

Western politicians and make them turn their back on Ukraine and on her. And 

that’s what Yanukovych’s administration is trying to achieve. They spent millions 

of U.S. dollars hiring American audit companies in hoping they can find traces of 

her corruption. Hundreds of her ex-coworkers were summoned for questioning. They 

were looking hard, but never found anything and they never will. 

The current government’s activities are not only ruining the image of Ukraine, 

and Ukraine as a united nation, but also the profitable sectors of the economy, that 

become paralyzed and eventually abandoned, when the rule of law is ignored. Successful people prefer to leave Ukraine and our population is declining. 

Indeed, not even our Constitution has survived Yanukovych’s contempt for law. 

To grab more power for himself, he simply junked it. His first breach of the Constitution, was signing a shameful Kharkov agreement with Russia which was nothing but a concession of Ukraine’s national interests. The lease of Sevastopol naval 

base to Russia was supposed to give Ukraine a major discount on Russian natural 

gas, but at the end of the day Yanukovych got a price $100 higher than my mother 

did in 2009. By this standard, he and not my mother should be in prison if the law 

was applied equally. 

I know that Ukraine must seem like a faraway place, and that our problems must 

also seem distant from the concerns of Americans at this difficult time for America. 

But just as no man is an island unto himself, no democracy is an island. When one 

nation’s is allowed to be hijacked, all democracies are threatened. Ukraine exists in 

a fragile neighbourhood, where war broke out just a few years ago across the Black 

Sea in Georgia. 

I am here today to answer your questions, Senator Shaheen, but also to plead 

that America do all that it can to preserve democracy in my country. My mother’s 

plight has united many great, strong nations and amazing people, true heroes of our 

time who are trying to get her and other political prisoners out of jail. We are hoping for your support. It is paramount for Ukraine to have free and fair elections this 

fall, but it would be impossible without major opposition leaders. 

I know my mother will not let Ukraine fall back into the Soviet past. She is strong 

enough to do it and to win the elections if she is allowed to run. She has already 

succeeded in bringing fractioned opposition into one united front. 

The enemies of democracy and freedom should not be welcome in a democratic 

society unless they correct their mistakes. I ask you to consider all possible ways 

to influence them and to explain to them the consequences of their actions. But 

41

most of all, I ask you to speak out, loudly and clearly, so that the people of my country do not feel abandoned and lose hope.

Senator SHAHEEN. Thank you very much for being here and for 

your eloquent testimony. You point out, as the previous panel did, 

that this is about more than just the case of your mother, as difficult as that is personally, but it is also about selective persecutions and rule of law and really moving the democratic process 

backward in Ukraine, unfortunately, rather than keeping it moving 

forward. 

Can you talk a little bit about how the public in Ukraine has 

reacted to your mother’s imprisonment? 

Ms. TYMOSHENKO CARR. Well, of course, during the beginning of 

the court, there were many people coming, joining us and the family and the team outside the court. And we could see many supporters even throwing themselves under the prison van when my 

mother was taken, when she was arrested on the 5th of August. 

But the amount of the military forces and police forces accumulated there brutally stopped any kind of protests by the court and 

actually the protests after that were maybe not so numerous but 

were definitely less in number than the military and the police. 

A lot of statements and appeals to free her were made by the 

local elite, by the actors, intelligentsia, by the leaders of our civil 

society. I mean the support was and still remains unprecedented. 

I mean, the support is growing and she has become more popular 

now than Yanukovych and his party. 

Senator SHAHEEN. You talked about the statement of National 

Security Director Clapper and I talked a little bit about the letter 

from Secretary Clinton to your mother. Are there other actions that 

the United States can take to demonstrate our support for your 

mother’s release and how has your mother responded to some of 

those statements? 

Ms. TYMOSHENKO CARR. Well, I think she only holds on because 

of the support of the democratic world now, and now we see that 

the pressure is building because the repressions are becoming 

worse in Ukraine. And of course, we are here to ask you to keep 

up this pressure because, as we see with other cases around the 

world of political prisoners, this helps. And the more we make sure 

that the regime and the people who are persecuting their opposition in Ukraine should know that they are under watch and their 

course of action should be changed. 

We could also ask about restrictive measures to those in particular who are creating this political repression and cynically continuing to do so despite signals from the democratic world. Of 

course, it is my mother’s and Mr. Lutsenko’s and other prisoners’ 

concern that Ukrainian nation does not suffer from such actions. 

Senator SHAHEEN. Thank you. 

I understand that your father was recently granted political asylum in the Czech Republic, I understood because there were some 

concerns that he might also be arrested. Are you hearing that 

about others who have been part of the opposition, and are you 

afraid for your own safety? 

Ms. TYMOSHENKO CARR. Well, thank you for this question. 

The old cases that have been reopened against my mother actually have been reopened also against the members of my family 

42

and against her ex-colleagues and friends, and there is a tremendous pressure that these people will be put and were put under 

prosecution. And my grandfather, who is a victim of stroke—he 

can’t even move—he has been put under investigation now with no 

legal basis as well. 

At least the people who are under prosecution now—and every 

day we found more and more. They are mostly members of the 

opposition like the ex-governor of Kharkov, Mr. Avakov, who has 

been recently now also put under investigation. Her house has 

been searched by people in masks without any legal basis. And he 

had to flee the country. This, I am afraid, will continue. 

Senator SHAHEEN. Thank you very much. 

Senator Menendez. 

Senator MENENDEZ. Thank you, Madam Chair. Thank you for 

holding this hearing. I think it is incredibly important. It seems to 

me that the Ukraine is at a crossroads. It is backsliding on human 

rights. Corruption is on the rise. The energy sector has great potential, but it seems to be largely a mess right now. And I think its 

political leaders have to decide where it wants to hitch its wagon 

in the future: to the West or to Russia. 

It is of real concern to me, as someone who cares very much 

about democracy and human rights on this committee, that while 

the Orange Revolution was a success, its leaders, obviously, have 

not followed the spirit of that revolution at the end of the day. 

Freedom of the press is restricted. The 2010 local elections were 

largely a sham, and we have the present set of circumstances that 

we are talking about. 

So I really appreciate the chair’s leadership in calling this hearing. 

Ms. Tymoshenko, I appreciate your coming before the committee. 

I personally believe your mother is a pioneering and incredibly 

strong woman who is an example for all people who care so much 

about their country that they are willing to endure extraordinary 

hardship and not just lay down the face of oppression. And I think 

having you in this panel at this hearing is an extraordinary way 

to inform the American people about your mother. 

I am wondering what else you think my Senate colleagues, who 

might pay some attention here, can do to make sure that more people learn about her situation and keep the pressure on the Ukrainian authorities to seek her freedom? 

Ms. TYMOSHENKO CARR. Thank you, Senator. 

Well, I wanted to mention the resolution that was recently 

passed in the Parliamentary Assembly of the Council of Europe, 

and it states very strong points on ways out of this political crisis 

and names a few solutions which is humanitarian release, but 

actually unfortunately now it became not as much as a political but 

humanitarian problem for the people illegally put behind bars 

because of their health and maltreatment. But also it is calling 

President Yanukovych to use all constitutional means to solve the 

situation and to release the political prisoners. So we wanted to 

urge you to act upon this resolution and to join in the efforts with 

EU to follow this up and put the pressure more according to the 

points to the Government of Ukraine. 

43

Senator MENENDEZ. Well, I appreciate that. I am concerned by 

the trajectory in the Ukraine, as the human rights situation 

worsens it is starting to remind me of the shameful conditions of 

the Soviet era in which the yokes were broken from. I know your 

mother worked very hard to throw off the tyranny of the Soviet 

past, and to see her and other opposition leaders in jail is a 

reminder that no one is safe in today’s Ukraine. And so I hope, 

Madam Chairman, that for our bilateral relationship the State 

Department is focused on changing the course of events. 

I am also very concerned about the growing economic relationship between the Ukraine and Russia, not in the context of a relationship that any two countries might have in a bilateral way, but 

especially as it relates to energy cooperation. That it is ultimately 

perverting the views of what the Ukrainian society and democracy 

should be about. 

I know you are here primarily to focus on your mother’s freedom, 

which I fully understand. I am wondering whether you have a view 

as to how we convince President Yanukovych to look at Ukraine’s 

path in the future and economic prosperity, not to a return to 

Soviet-style centralized government, but to release the power and 

the dignity of the Ukrainian people as well as their ingenuity and 

intellectual ability to make for a better Ukraine. 

Ms. TYMOSHENKO CARR. Thank you. 

I wanted to stress again that this case is not just about my 

mother. My mother is just an example of such repressions that 

happen. As you said, if it is happening, it can happen to leaders 

of opposition, the people who are popular now and enjoy majority 

support in the country, then what can happen to a simple citizen 

of Ukraine? And this is the crisis that touches everyone, all the 

Ukrainian citizens, and actually the surrounding countries that 

Ukraine is really the remaining democracy and had a very strong 

chance to restore the democracy if the elections in autumn will 

happen and will be fair and free. And that could only happen if the 

opposition leaders are present there. 

So when the Parliament or Assembly of the Council of Europe 

demanded for President Yanukovych to use all constitutional 

means to free political prisoners, it also urged him to amnesty 

these political prisoners and let them take the rightful parts in the 

parliamentary elections so that people of Ukraine can vote and 

choose and judge rather than the manipulated courts. 

So I think the actions of Yanukovych and his team are now isolating Ukraine, and their playing off the interests against Europe 

and Russia just led us to more isolation. And I think that in order 

to save democracy, the only way is to urge and pressure our government and Yanukovych to change his course even maybe by 

applying certain restriction measures to their luxuries and wealth 

that they allow themselves, unfortunately, at the moment. 

Also Transparency International recently made a statement of 

the massive corruption going on in preparation to Euro 2012, and 

there are many examples, unfortunately, of such corruption. 

Senator MENENDEZ. Thank you. 

Thank you, Madam Chair. 

Senator SHAHEEN. Thank you very much, Senator Menendez. 

And thank you, Ms. Tymoshenko, for being here. 

44

Ms. TYMOSHENKO CARR. Thank you very much. It is an honor. 

Senator SHAHEEN. We will continue to follow what goes on in the 

Ukraine very closely. 

I appreciate all of the witnesses’ testimony today. 

The record will be open until close of business on Friday. 

At this time, I would like to close the hearing. 

[Whereupon, at 4:14 p.m., the hearing was adjourned.] 

MATERIAL SUBMITTED FOR THE RECORD

JOHNS HOPKINS CENTER FOR TRANSATLANTIC RELATIONS REPORT ‘‘TOWARDS AN

OPEN UKRAINE: POLICY RECOMMENDATIONS’’

Ukraine is one of the biggest, but also the second poorest country in Europe after 

Moldova. Given its territorial size, its geographic position, its almost 50 million population and its role as the main transit state for Russian oil and gas exports to 

central and western Europe, Ukraine has been a critical strategic factor for EuroAtlantic and Eurasian security in the two decades of its independence. Today, it 

stands at a critical crossroads between developing a more open society increasingly 

integrated into the European space of democracy, prosperity and market-based economics grounded in respect for human rights and the rule of law, or an increasingly 

autocratic system, mired in the economic stagnation and political instability that is 

historically characteristic of Europe’s borderlands. The choice is straightforward: 

Ukraine can either join the European mainstream or remain in a gray zone of insecurity between Europe and Russia. 

The following recommendations outline how Ukraine could move away from immobility in the gray zone of domestic and international politics in which it finds 

itself, break its reform logjam and become an Open Ukraine—a democracy accountable to its people with a socially responsible market economy, governed by an administration that respects the rule of law, fights corruption and that can effectively 

implement needed reforms, and that is increasingly integrated into the European 

mainstream. These proposals are intended to expand the horizons of Ukrainian 

elites and opinion leaders and equip them with concrete reasons to move from shortterm ‘‘momentocracy’’ to a more powerful vision that could guide their country. They 

also suggest ways Ukraine’s neighbors can make the costs and benefits of Ukraine’s 

choices clear. 

POLITICAL REFORMS AND DEMOCRATIZATION

Ukraine’s fundamental problem has been government dysfunction with leaders 

changing the constitution and election laws to deny power to the opposition or maximize power for themselves after elections. For Ukraine to have more effective governance, it must tackle seven interrelated challenges: switching from a presidential 

to a parliamentary political system, which is better suited for encouraging democratization; parliamentary and legislative reform; administrative reform; strengthening 

the rule of law; judicial reform; eradicating systemic corruption; and strengthening 

civil society and independent media.

• Switch to a Parliamentary System. The scholarly and policy debate has been extensive whether presidentialism or parliamentrism is best suited for countries 

in transition. Of the 27 post-Communist states, those with successful democracies in Central-Eastern Europe have adopted parliamentary systems while 

authoritarian regimes in Eurasia are primarily bult on Presidential systems. 

Parliamentary systems have therefore been successful in promoting democracy 

and European integration than presidential systems. Over two decades Ukraine 

has had a presidential system for a decade (1996–2005) and again since 2010 

when the Constitutional Court ruled under pressure from the executive that 

constitutional reforms adopted in December 2004 and going into effect after the 

March 2006 elections were ‘‘unconstitutional’’ (the same Court had refused to 

consider the same question under President Viktor Yushchenko). Presidentialism in Ukraine has stifled democratic developments, encouraged authoritarianism, promoted censorship of the media and became a nexus of corruption 

and illegality. Unelected regional governors, which duplicate elected local councils and mayors, have traditionally been at the center of election fraud, patronage and corruption. Abuses of presidentialism are clearly evident under President Viktor Yanukovych who has sought to maximize power at the expense of 

Parliament, the Cabinet, regions and local councils. 

45

• Parliamentary and Legislative Reform. A strong and independent legislature is 

vital for jump-starting the reform process in Ukraine, yet the Ukrainian parliament turned into a rubber-stamp body with minimal political authority. Open 

Ukraine requires legislation, drafted in a transparent manner and be open to 

public deliberation, that would ensure a level playing field for competing political parties and their fair representation in the Parliament. The mixed system, 

adopted in November 2011 ignoring recommendations by the Council of 

Europe’s Venice Commission, prevents this by skewing election results in favor 

of the Party of Regions. Provisions for full disclosure of candidates’ funding 

sources and for challenging election results are essential for a democracy. The 

law should limit the ability of electoral commissions to interfere with the electoral process. The parliament’s role in choosing candidates for Cabinet positions 

must be revived. It must also have strong oversight powers over the executive. 

Internal rules for coalition formation should prioritize party factions over individual deputies; the majority coalition should be formed based solely on parties 

elected to the parliament and not, as has been the tradition until now, of new 

parties and factions created after elections within the life of parliaments. There 

should also be a strict enforcement of the rules requiring deputies to vote individually (that is, a halt to the widespread practice of absentee voting) and disclose their personal incomes. The legislative process should be streamlined to 

improve the quality of legislation, possibly with the assistance of a Council of 

Foreign Advisers as was the case in the first half of the 1990s. • Administrative Reform. The executive needs to be streamlined and decentralized to allow for more effective and accurate application of law. Many government ministries and state committees have overlapping responsibilities, duplicating functions and wasting resources. • Strengthen the Rule of Law. In Ukraine the law continues to be viewed as an 

instrument of partisan governmental power. That which is construed to be ‘‘illegal’’ is whatever the government in power finds to be politically expedient. Procedural safeguards that are at the heart of a rule of law legal system are absent 

or ignored. Ukraine should fundamentally and profoundly transform its legal 

system if it is to spread European values and the rule of law. This means coming to grips with the legal system’s catastrophic Soviet past; reforming the legal 

academy; and reforming the laws, procedures and mechanisms that remain in 

place as holdovers from Ukraine’s totalitarian legacy. The Prosecutor’s office 

needs to be overhauled or replaced. It has become highly compromised through 

corruption and under Yanukovych it has returned to its Soviet function as a 

state arm of repression. • Judicial Reform. In a system that respects the rule of law, judges are professional, independent and impartial; they are not ‘‘accountable’’ to prosecutors. 

Prosecutors, in turn, do not act as the partisan political arm of the government. 

That is not the case in Ukraine today. The court system is endemically corrupt, 

incompetent and subject to commercial and political influence. Judges are routinely bribed to secure convictions or release of those charged or to alter title 

deeds in businesses in the widespread practice of corporate raiding. The President exerts political influence over the judiciary through the High Council of 

Justice, which is dominated by representatives of the ruling party and the 

Chairman of the Security Service, a direct conflict of interest. Ukraine’s judicial 

system is in dire need of overhaul. The competence and jurisdiction of differing 

courts must be clarified. Training and selection of judges need to be made more 

transparent and meritocratic. Courts and judges require sufficient financing so 

as to discourage corruption. Concepts along these lines were approved five years 

ago, but have yet to be implemented. Court proceedings should be made more 

transparent, impartial, and effective. Procedures for mediation, independent 

arbitration, and enhanced use of notaries should be introduced. The power of 

the High Council of Justice to select or discipline judges should be transferred 

to a nonpartisan body comprising of authoritative and experienced judges, such 

as the High Qualifications Commission. The President’s and Parliament’s role 

in appointing or removing judges should be limited to mere approval of the 

Commission’s recommendations with few clearly specified exceptions. 

• Eradicate Systemic Corruption. The presence or absence of rule of law in a society is closely related to the level of corruption. Corruption has become endemic 

in Ukraine and is growing; it has degraded the country’s governance, undermined its democracy, reduced public trust in state institutions, distorted the 

economy, discouraged foreign direct investment and been exported to Europe. 

To reduce corruption, Ukraine needs political leadership committed to and 

greater societal awareness that corruption impedes economic development, 

democratization and European integration. Organizations and individuals 

46

committed to combating corruption need to mobilize behind specific, concrete 

initiatives—such as draft laws regarding codes of criminal procedure, professional ethics, and financial declarations by public servants. There is a wealth 

of international experience on how to reduce corruption, particularly from other 

post-Soviet or post-socialist countries; Ukraine should take advantage of such 

experience. • Strengthen Civil Society and Independent Media. Media censorship under 

Yanukovych has not yet reached the level characteristic of Kuchma’s presidency 

and is different in nature. Nonetheless, even though major media outlets in 

Ukraine have not yet fallen fully under the government’s control, their independence has eroded substantially due to the excessive interference of owners 

keen to remain on good terms with the executive in news coverage. Television 

news is dominated by good media coverage of the authorities and either paints 

the opposition in a negative light or ignores them. Only print and Internetbased media still function as an instrument of accountability and a source of 

reliable news. Further international assistance to these media outlets is vital 

for supporting media pluralism. 

ECONOMIC GROWTH AND MODERNIZATION

During the last two decades Ukraine has moved from a command administrative 

system but has still to arrive at the final destination of a market economy, despite 

recognition by the U.S. and EU in 2005–2006 of a ‘‘market economy’’ status. 

Ukraine’s ‘‘partial reform equilibrium’’ is stuck between the Soviet past and European future and only concerted reforms will move the economy towards a 

Europeanstyle social market economy. Ukraine was hit hard by the global economic 

and financial crisis. The combination of weaker demand from Ukraine’s trading 

partners, falling export prices, rising import prices and reduced access to international financial markets sliced GDP by 14.8 percent in 2009, and it will take until 

2013 to recover that lost ground. Inflation is hovering above 9 percent and unemployment at 8 percent. The hryvnia, Ukraine’s national currency, has lost almost 

half of its value against the U.S. dollar since July 2008. Pension expenditures increased from 9 percent of GDP in 2003 to 17.6 percent in 2010, one of the highest 

levels in the world—yet pension fund revenues cover only two-thirds of expenditures, the rest being covered by transfers from the budget. Demographic pressures 

will increase the burden on the working population even further. Ukraine’s successful accession to the WTO in May 2008, after 15 years of negotiations, was an 

isolated foreign policy achievement of the Yushchenko presidency. President 

Yanukovych launched reforms in summer 2010, but implementation has been very 

slow due to a lack of political will, populist concessions ahead of parliamentary elections in 2012, and a deficit in government capacity to draft EU-compatible legislation. The refusal to implement further stages of the 2010 MF agreement, including 

raising household utility prices for a second time, has led to the suspension of IMF 

tranches. It is imperative that Ukraine return to the IMF agreement in order to introduce reforms and boost foreign investor confidence. 

The following areas are urgent on the road to an Open Ukraine:

• Pension reform has been long delayed, yet is critically important for restoring 

Ukraine’s financial sustainability. The IMF demand to raise the pension age 

from 55 to 60, as part of the July 2010 agreement for Ukraine, was adopted 

by parliament in 2011. 

• Simplified taxation and licensing, including simplified accounting of revenues, 

should be introduced for small and medium businesses. Previously introduced 

reform principles must be made operational, such as the ‘‘one-stop shop’’ for registering and licensing businesses. Any permits other than those directly stipulated by the law should be abolished. Remaining permits and activities subject 

to mandatory licensing should be compiled into a single piece of legislation. 

• Corporate legislation reform. The Economic Code of Ukraine is a confused mix 

of Soviet command economy elements and market institutions. It should be 

abandoned. The Civil Code of Ukraine should comply with EU Directives on 

company law. The new law on joint stock companies must be amended to comply with EU Directives on company law, and internationally accepted principles 

of corporate law and corporate governance best practices, by replacing the profit-extracting legal model for such companies to one of investor protection. Modern legal structures are needed for small and medium enterprises and domestic 

and foreign investors via a separate limited liability company law that provides 

for an efficient system of governance, control bodies and reliable protection of 

minority participants. The law on re-establishing solvency of a debtor or declaring a debtor bankrupt must be amended to prevent abuses by related-party 

47

(conflict of interest) transactions and by enhancing the personal responsibility 

(liability) of company officers and the bankruptcy commissioner. 

• Agricultural Reform. The moratorium on trading agricultural land should be 

ended and free access of citizens and agricultural producers to land resources 

ensured. Prices for agricultural land should be liberalized and work on establishing a land cadastre should be continued. Consideration should be given to 

allowing foreigners and foreign-owned companies to own some agricultural land 

deposits (e.g. up to 10 percent of land in each region [oblast]). Such reforms 

would attract more capital, help to import and disseminate modern agricultural 

technologies, and facilitate greater access to international channels of distribution of agricultural products. Moreover, Ukraine has a strong interest in the liberalization of global trade in foodstuffs. Administrative restrictions on exports 

should be abandoned and delays in VAT refunds to exporters urgently fixed. 

Targeted income support measures should be introduced for poor families to 

compensate for the rise in foodstuff prices. Social support and re-training programs for redundant agricultural workers need strengthening. Ukrainian law 

on state support of agriculture should be consolidated into one piece of legislation. An information service for agricultural markets should be established to 

monitor and forecast global food markets and collect information on standards 

in other countries. Sanitary and safety standards should, as a matter of high 

priority, be aligned with international and EU norms. Establishing WTO-compatible free trade agreements with other non-EU trade partners is in Ukrainian 

interests. 

ENERGY EFFICIENCY AND INDEPENDENCE

Ukraine’s energy sector is plagued by aging infrastructure, widespread corruption, 

political manipulation of utility rates and statistics, and minimal foreign direct investment. Although Ukraine has oil, gas and coal reserves, it is one of the most energy inefficient economies in the world and only able to cover 47–49 percent of its 

energy demand. Gas imports account for 7–8 percent of Ukrainian GDP and are 

clearly unsustainable. Around half of Ukraine’s total energy consumption comes 

from natural gas. Although Ukraine has large conventional and unconventional gas 

resources, it will be unable to boost domestic gas production without deeper and 

comprehensive reforms and significant foreign direct investment. While it has coal 

reserves for another 100 years, the productivity of coal extraction is very low and 

its production costs are high. Coal mining is highly dangerous and Ukraine has one 

of the highest rates of accidents in the world, close to Chinese levels. Without restructuring, modernization and liberalized market reforms, Ukraine will be unable 

to cope with its energy supply challenges, including decreasing its extremely high 

energy consumption. 

Moreover, Ukraine is deeply dependent on Russia, which supplies 85–90 percent 

of Ukraine’s oil imports and 75–80 percent of its natural gas imports. In addition, 

in 2010 Ukraine signed agreements with Russia to build two nuclear reactors and 

to deliver only Russian fuel to all Ukrainian reactors until they cease operation. 

These arrangements have stunted necessary domestic reforms and weakened 

Ukraine’s bargaining position vis-a-vis Russia, particularly with regard to gas imports and transit. Moscow uses the gas issue to exert pressure on Kyiv over various 

bilateral issues. Kyiv signed a gas agreement with Moscow disadvantageous to 

Ukrainian interests, yet Moscow insists that any review of that agreement would 

only be possible if the state gas company Naftohaz Ukrainy merged with Gazprom, 

ownership of the Ukrainian GTS was transferred to Gazprom, or if Ukraine joined 

Russia’s Customs Union with Belarus and Kazakhstan. Yanukovych has publicly rejected such conditions as ‘‘humiliating,’’ and Ukrainian law prevents the selling, 

renting or leasing of critical energy infrastructures to foreign countries and companies. Russia is pushing for a new gas consortium over the GTS acquiring majority 

control, leaving Ukraine just 20 percent of its shares. Such an arrangement would 

question Ukrainian sovereignty and independence, threaten efforts at deeper democratic and market reforms, and pose considerable challenges to EU energy security 

and foreign policy. Giving up sovereignty over the GTS is seen by the Nikolai 

Azarov government as a better option than implementing unpopular IMF reforms 

(such as raising household uility prices to reduce Naftohaz Ukrainy’s contribution 

of 2 percent to the budget deficit) as Russia will provide gas at a subsidized price 

in a new contract. 

An Open Ukraine requires Kyiv to boost domestic energy efficiency; eradicate endemic corruption in the energy sector; adopt all of the elements in the European 

Energy Community that it signed on to; and diversify its energy mix and strengthen 

its national security by reducing its dependence on Russia.

48

• Boosting Energy Efficiency. Ukraine’s energy infrastructure is inefficient and 

wasteful. The country has invested little in energy efficiency, yet such efforts 

are critical to Ukraine’s energy security. A major step forward would be for Kyiv 

to take the politically unpopular decision to raise gas prices for households and 

utilities, which are heavily subsidized (a first increase was undertaken in 2010 

but the Cabinet balked at taking a second increase ahead of the 2012 elections). 

The domestic political fallout could be mitigated by compensatory measures for 

low-income households. Artificially low gas prices in the past have dampened 

any incentive to boost domestic gas extraction or to improve efficiency and a 

new gas contract with a return to subsidized prices will again freeze Ukraine’s 

inefficient and wasteful energy sector. These have fuelled high-price gas imports 

from Russia, compromising Ukraine’s national energy security and its overall 

economic competitiveness. Most Ukrainian energy producers have been unable 

to finance even their replacement investments because their revenues from 

domestic sales do not cover their costs. The only real beneficiary of the artificially increased demand for gas is the Russian state gas company Gazprom. In 

contrast, the Ukrainian state gas company Naftohaz Ukrainy needs budgetary 

support because of highly subsidized utility prices. 

• Eliminate endemic corruption in the energy sector. The lack of strong market reforms is linked to systemic corruption and a nebulous legal and legislative 

framework, which have unnerved the markets and scared away foreign investment. If Ukraine is serious about its energy security, it will work to eradicate 

systemic corruption and establish clear legal ground rules for investments in its 

energy sector. 

• Adopt European Standards. On February 1, 2011, Ukraine became a full member of the European Energy Community (EEC), which extends the EU’s internal 

energy market to Ukraine. It is strongly in Kyiv’s interest to live up to the obligations such membership entails, including full adherence to anticorruption 

norms of European law and implementation of the EU’s third energy package 

of unbundling energy production from its distribution in gas and electricity markets by January 2015. The implications of this third package are far-reaching 

and often not fully understood. EEC members are obliged not only to revise 

their laws and to adopt secondary legislation but also to promote fundamental 

changes in market structures by introducing market rules and legislation. Central European practice offers Ukraine a means to implement EU acquis in energy despite its dense interwoven ties with Russia, whereby long-term Russian 

contracts could enjoy temporary derogation from EU regulations. 

• Diversify. Energy cooperation with the EU and other foreign partners could help 

Kyiv diversify its fossil-fuel imports and its overall energy mix and reduce its 

dependence on Russian gas and oil. Ukraine has excellent wind resources and 

possesses significant unconventional (shale) gas deposits. Ukraine’s Parliament 

has already passed more investor-friendly legislation to open its domestic natural gas market to foreign shale gas and coal-bed producers. Exploitation of 

these reserves could give buyers more leverage to renegotiate the high Russian 

oil-indexed gas price demands that are included in long-term contracts, and 

could drastically reduce Ukrainian dependence on Russian gas. Moreover, the 

confluence of EU energy market liberalisation, stepped-up antitrust enforcement, and the emergence of unconventional gas supplies in European markets 

may prompt Russia to increase its own efforts at energy efficiency and to invest 

in its own unconventional gas resources, which may be much cheaper than investing in the extremely costly Yamal Peninsula and Shtokman projects, and 

perhaps lead to greater reciprocity and symmetry in both Ukrainian and EU energy relations with Russia. On the other hand, if Ukrainian and European gas 

policies remain hostage to long-term contracts, ‘‘take-and-pay’’ clauses and oil 

price linkages, even though international gas markets have de-linked from oil 

price markets prospects are dim for new and sustainable integrated energy and 

climate policies. 

A STRATEGY FOR THE WEST: OPEN DOOR, STRAIGHT TALK, TOUGH LOVE

Given Kyiv’s turn to autocracy, it would be tempting for Western policymakers, 

besieged with other priorities, to turn their backs on Ukraine. This would be a strategic mistake. The United States and the EU have a strong stake in an Open 

Ukraine secure in its borders and politically stable. A more autocratic, isolated and 

divided Ukraine would be a source of continued instability in the heart of Europe. 

It would make it harder for Georgia and Moldova to pursue their pro-Western 

course. It would diminish prospects for reform in Belarus. It would perpetuate a 

gray zone of borderlands on a continent that has until now enjoyed an historically 

49

rare moment to transcend the tragedies of its past divisions. Western leaders should 

avoid falling into the same short-term mindset that currently befalls Ukrainian 

elites, and adopt a broader strategic perspective. 

Ukraine is beset by regional and cultural divisions that will have a profound impact on the country’s political evolution. As Ukrainians debate the norms that 

should guide their society, normative consistency by their Western partners can provide orientation and strength. This does not mean softening norms or conditions for 

effective engagement, but it does mean being clear about the benefits that could result from adherence to such norms. The West has a vested interest in ensuring that 

Ukrainian leaders understand the opportunities and consequences that could result 

from their decisions, and should be consistent in setting forth a coherent and coordinated framework of relations that can help shape those choices. 

As Ukraine struggles to find its place in 21st century Europe, therefore, the door 

to that Europe should be kept open. There is no consensus at present within the 

EU about the possibility of ultimate Ukrainian membership. Yet if the door to 

Europe is closed, the Ukrainian Government will have little incentive to advance 

political and economic reforms, and could either turn to alternative geopolitical 

frameworks or remain isolated in a geopolitical gray zone, generating instability and 

insecurity throughout its wider neighborhood. Clear EU support for the principle of 

the Open Door, on the other hand, can help Ukrainians build the courage and political will to implement tough reforms at home—not as a favor to others, but because 

they understand it is in their own interest to do so. have an effect on internal developments in Ukraine. And if Kyiv begins to implement reforms that promise to move 

Ukraine toward an open, democratic and market-based society, such actions can in 

turn affect what leaders in EU capitals are willing to offer Ukraine. 

Based on the continued validity of the Open Door, Western strategy should advance along two tracks that work together. The first track should demonstrate the 

genuine interest of North America and Europe in close and cooperative ties with 

Ukraine, and should set forth in concrete terms the potential benefits of more productive relations. They should make it very clear that Europe and the U.S. stand 

as willing partners if Ukraine decides to invest in its people, forge effective democratic institutions, build a more sustainable economy grounded in the rule of law, 

tackle endemic corruption, diversify and reform its energy economy; and build better 

relations with its neighbors. U.S. and European efforts should seek to strengthen 

democratic institutions; promote the growth of civil society, especially independent 

media; support economic reforms; provide technical assistance for energy reforms; 

and facilitate interaction between Ukrainian citizens and their neighbors, including 

visa liberalization, business and student exchanges. If Kyiv signals by its actions 

that it is interested in deepening its engagement with the West, North America and 

the EU should be equally ready to engage while pushing for more comprehensive 

economic and political reforms aimed at facilitating Ukraine’s integration into EuroAtlantic institutions. 

At the same time the U.S. and Europe should make it clear that if Ukraine’s leadership abuses the rule of law, facilitates corruption, fails to advance effective reforms, and resorts to intimidation tactics, as is currently the case regarding the 

Tymoshenko conviction, the prospects for an open, prosperous and secure European 

Ukraine will fade. International efforts to deter Ukraine’s further backsliding should 

combine the threat of costly sanctions toward the ruling elite with calls for 

unencumbered engagement of citizens in political life, targeted assistance to key 

civil society actors and specific proposals for reforms that could pave the way toward 

a more open Ukraine. Outside pressure on Ukrainian authorities clearly has its 

limits, of course, and the main brunt of responsibility for the evolution of Ukraine’s 

political regime lies with domestic actors. However, as the Orange Revolution demonstrated, Western influence can restrict the range of options available to authorities who choose to fight their own people, and can help to weaken the internal legitimacy of some of the government’s antidemocratic policies. 

In short, a proactive Western policy might be best characterized as Open Door, 

Straight Talk, and Tough Love. Such an approach requires persistence, patience, 

and consistent engagement on the following priorities:

• Support Civil Society. By monopolizing political space and marginalizing the opposition, Ukrainian authorities undermine the reform process and weaken public trust in government activities. Transformative reforms of the magnitude 

needed in Ukraine require support across the country and from political forces 

on both sides of the major political divide. North American and European governments and international organizations should stress the critical importance 

of a free and fair parliamentary campaign in October 2012 ahead of the process 

and cast a spotlight on even minor violations of democratic procedures. They 

should weigh in against any signs of abuse of state-administrative resources or 

50

biased limitations on opposition activity or campaign financing, in order to prevent further emasculation of civic groups or further closure of the civic space 

for independent political action. They should encourage Kyiv to lower barriers 

to independent media and to ensure media access to the opposition. They should 

encourage active involvement of opposition parties and leading NGOs in the 

process of drafting reform strategies and ensuring government accountability at 

all levels. International organizations should provide technical assistance in 

training election observers and electoral commission members representing all 

political parties. 

• Advocate Institutional Reform. Western governments and international organizations, particularly representatives of post-Communist countries, should advocate targeted institutional reforms aimed at establishing a legally grounded 

balance of authority among the executive, legislative, and judicial branches; increasing the government’s accountability to the Parliament; and strengthening 

oversight agencies, such as an independent anticorruption bureau, accounting 

chamber, the office of the ombudsman and the financial regulatory body. They 

should offer concrete suggestions to depoliticize the judiciary and the civil service, which are still dominated by vested political and business interests. 

• Support Ukrainian Efforts to Tackle Systemic Corruption. The West should develop consistent medium- to long-term strategies to help Ukraine fundamentally 

reform its legal system and to reduce systemic corruption. 

• Offer Technical Support for Reforms. Ukraine’s Cabinet lacks staff to develop 

draft legislation and government employees are not qualified enough to develop 

modern economic legislation. Provision of technical assistance will be crucial to 

Ukrainian political, administrative, economic and energy reforms. 

• Be Clear about the Consequences of Undemocratic Activities. North America and 

the EU demonstrated impressive unanimity in condemning the trial and conviction of Yulia Tymoshenko in October 2011 and issued strong demands for her 

release and resumption of her ability to participate in the political life of the 

country. They should link such condemnation with concrete measures that 

would raise the cost to Ukrainian authorities of further undemocratic steps. 

Such measures should include suspension of Ukraine’s membership in the 

Council of Europe; introducing visa bans for those officials responsible for ordering the crackdown against protesters or persecution of the opposition; a freeze 

on negotiations for an Association Agreement (including the DCFTA); and limiting bilateral contacts with top Ukrainian officials and state visits to Kyiv. At 

the same time, the West must maintain its clear message that the door to 

Europe and Euro-Atlantic institutions remains open should Ukraine work to 

create the conditions by which it could in fact walk through that door. 

• Make Better Use of the Eastern Partnership. In order to articulate a policy for 

neighbors for whom membership is a distant goal, the EU launched the Eastern 

Partnership in 2009 with Armenia, Azerbaijan, Belarus, Georgia, Moldova, and 

Ukraine. Yet instead of using the EaP to deepen engagement in Ukraine and 

other Partnership countries, EU officials dampen their own influence with rhetoric that distances themselves from the prospect of a space of stability, prosperity, and democracy as far across the European continent as possible. The EU 

should be far more proactive in its use of the Eastern Partnership.

Æ Combine Broad Visa Liberalization with Targeted Restrictions. Kyiv has a 

strong interest in visa liberalization with the EU; one in every ten 

Schengen visas goes to a Ukrainian. The EU should calibrate its approach 

by offering a generous broad-based approach to visa liberalization for 

Ukrainian citizens (particularly young people and students) and facilitating 

special possibilities for study abroad and cultural, educational, business 

and local government exchanges, so that the average man and woman in 

the street, especially in the east and south of the country, can gain personal awareness of the benefits to be derived from closer relations; This 

strategy of maintaining an Open Europe for Ukrainian citizens should be 

combined with targeted visa bans and restrictions for Ukrainian officials 

engaged in undemocratic or illegal activities. 

Æ Engage Ukraine Actively via a Transcarpathian Macro-regional Strategy. 

New EU macro-regional strategies, for interest with the Danube states, 

offer a potential model for engagement with Carpathian states. This special 

area is surrounded by four EU member states, namely Poland, Slovakia, 

Hungary, and Romania. All four are neighbors to Transcarpathia and to 

each other by cultural, historical and ethnic ties. The Transcarpathian 

Region could be developed into a strategic Ukrainian bridgehead for integration into Europe. It is already linked by broad-gauge railway to HunVerDate 0ct 09 2002 13:46 Jul 26, 2012 Jkt 000000 PO 00000 Frm 00054 Fmt 6633 Sfmt 6621 S:\HEARIN~1\112THC~2\2012IS~1\020112-A.TXT BETTY
51

1Popular support for NATO—22–25 percent and below 10 percent in the Russified areas of 

eastern Ukraine—is much lower in Ukraine in comparison to other states in Eastern Europe. 

See the chapter by F. Stephen Larrabee. 

gary and Slovakia, and its special location and multiethnic traditions are 

convenient for offshore zones and assembling factories. Æ Support Ukraine’s democratic development. The proposed European Endowment for Democracy should disburse aid to Ukrainian civil society and encourage and defend Ukraine’s democratic development to monitor Eastern 

Partnership policy toward Ukraine. The EU should ensure that its assistance is coordinated with U.S. and Canadian efforts to ensure they are complementary and not duplicative.

• Use the Association Agreement and DCFTA to Advance the Broader Strategy. 

With neither NATO nor EU membership on the horizon, the primary vehicle for 

keeping open the prospect for Ukraine’s closer ties to the European mainstream 

is the Association Agreement and Deep Comprehensive Free Trade Agreement 

(DCFTA) currently being negotiated between Ukraine and the EU. However, 

the EU has frozen the final negotiations slated to led to initialing of the agreement, due to concerns in various EU member states about the political repression and serious violations of rule of law—particularly the arrest and trial of 

former Prime Minister Tymoshenko—that have occurred since President 

Yanukovych took office. The DCFTA offers the EU a mechanism by which it can 

calibrate a two-track approach to Ukraine. Initial but . . . [insert language 

here]. The DCFTA is in fact a new generation economic agreement ranging far 

beyond a standard free trade agreement, not only liberalizing 95 percent of bilateral trade but aiming for deep and comprehensive harmonization of economic 

legislation. The opportunities for Ukraine are immense, given that the EU is 

the largest single market in the world, about 130 times larger than the Ukrainian domestic market and 15–20 times larger than the Russian, Belarus, and 

Kazakhstan markets combined. The benefits to all sectors of Ukrainian society 

of joining the DCFTA far outweigh the small number of benefits from entering 

a free trade agreement with the CIS. • Keep NATO’s Open Door while Engaging Closely. Ukrainian membership in 

NATO has again been pushed off the international agenda for the immediate 

future. While the door to NATO membership remains open to Ukraine (and 

Georgia) in principle, in reality there is little support in Western capitals for 

further enlargement of the Alliance in the near term. Focusing on NATO membership now will only inflame the political atmosphere and make progress in 

other important areas more difficult. The main obstacle is not Russian opposition—though this is an important factor—but low public support for membership in Ukraine itself. 1 On the other hand, Ukraine was the first CIS state to 

join the Partnership for Peace, has been one of the most active participants in 

its exercises, and the NATO-Ukraine Charter on a Distinctive Partnership gives 

Ukraine a unique status. Rapprochement with NATO increased Ukraine’s freedom of maneuver and led to an improvement of ties with Moscow. Ukraine contributes to nearly all U.N. and NATO peacekeeping operations, in some cases 

more than some NATO members. 

Nonetheless, as long as only about a quarter of the population favors membership, prospects for Ukraine being admitted to NATO remain remote. In the 

meantime, other steps in the security field could be taken to strengthen cooperation within the NATO-Ukraine Partnership in areas where there is mutual interest while encouraging progress toward more open democratic institutions. Such activities include engaging the Ukrainian military in a dialogue on 

military reform; continuing to involve Ukraine in peacekeeping operations, both 

within NATO and bilaterally; enhancing cooperation on nuclear safety; further 

developing their crisis consultative mechanism; and further developing ties in 

such areas as civil-military relations, democratic control of the armed forces, armaments cooperation, and defense planning. Information campaigns should 

highlight how NATO provides practical help to Ukraine in emergency situations, cyber-security, security to the Euro-2012 football championship, orders for 

Ukrainian industry, and support for the training of Ukrainian officers. A critical 

area of concern, as Ukraine turns autocratic, is democratic control and reform 

of internal security forces (Security Service, Interior Ministry, border guards, 

customs officers, Prosecutor’s office) whose numbers far outweigh the armed 

forces, are used in political repression and involved in corruption. • Engage Ukraine on Its Own Merits, Not as a Subset of Russia Policy. A successful Euro-Atlantic policy of engagement toward Ukraine cannot be a subset of 

Western policy toward Russia; it must consider its own substantial interests in 

52

an open Ukraine on their own merits. At the same time, the United States, 

Canada, and European allies should send a clear message to Moscow that they 

oppose any attempts to undermine the sovereignty of Russia’s neighbors, including threats to their territorial integrity. Upon entering office Yanukovych acted 

quickly to remove key irritants with Moscow, such as the international campaign to recognize the Holdomor (1933 artificial famine) was genocide; shelving 

plans to join NATO; and ramming through an unconstitutional measure that 

prolongs the stationing of the Russian Black Sea Fleet in Crimea to 2042–2047. 

Russia has demanded more, however, including Ukrainian membership in its 

CIS Customs Union or Russian ownership of the Ukrainian GTS. It is clear that 

Russia finds it very hard to respect Ukrainian sovereignty and independence. 

Yanukovych has received little in return for his efforts at appeasing Moscow, 

and despite his interest in closer relations with Russia, he has also shown that 

he still prefers being the leader of a sovereign country to being the governor 

of a Russian province. Nonetheless, he faces strong and consistent Russian pressure on key issues; Western policy should make the implications of his choices 

clear. For instance, Ukraine faces a choice between entering the CIS Customs 

Union of Russia, Belarus and Kazakhstan, which is likely to block all fundamental domestic market reforms; or proceeding with the kinds of domestic reforms that would enable Ukraine to reap the benefits of the DCFTA with the 

EU and closer integration with the European mainstream, including visa liberalization, competitiveness, transparency and accountability in Ukraine’s energy 

markets, greater investments in infrastructure and new technologies, and reduced energy dependency. The first choice demands far less than the second 

choice in terms of domestic reform, but the second choice promises substantially 

greater rewards. And joining the Eurasian Customs Union with countries that 

are not members of the WTO (Russia may soon join, but not Belarus and 

Kazakhstan) would require a renegotiation of Ukraine’s membership in the 

WTO and end Ukraine’s hopes for an Association Agreement and DCFTA.

We have no illusions about the difficulty of realizing the vision of an Open 

Ukraine. Yet the gains, both for Ukraine and for Europe, would be considerable. 

Ukraine’s choices are it’s to make, but it is the West’s responsibility to make the 

costs and benefits of those choices clear and credible to Ukraine’s leaders and its 

citizens.. 

53

LETTER FROM AMBASSADOR OLEXANDER MOTSYK, EMBASSY OF UKRAINE, 

WASHINGTON, DC


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