Head of U.S.-Ukraine Business Council: "There is going to be a big battle in Washington but I think that the new U.S. Administration will be inclined to further provide support for Ukraine"
President of the U.S.-Ukraine Business Council (USUBC) Morgan Williams, a lifetime GOP supporter, explains what Donald Trump’s victory means for Ukraine, what changes are to come in bilateral relations between Kyiv and Washington, and why Putin is the evil force the world has to deal with.
After the presidential elections in the United States, the state players are facing the need to reconsider their strategies for relations with the world’s only superpower. The outcome of the U.S. poll, a surprise to many, including the Democrats, has blurred the prospects of global foreign policy. As the U.S. has been one of Ukraine’s most vocal supporters and probably the most important ally, it is vital for Kyiv authorities to fine-tune the Ukraine-U.S. relations given the current realities and adopt a right strategy to pursue fruitful cooperation and ensure continued support against the background of Russian aggression.
President of the U.S.-Ukraine Business Council (USUBC) Morgan Williams explains what Ukraine needs to do to build up a right strategy for attracting U.S. investment, and why it is important to boost reforms.
Donald Trump is now officially the U.S. President–elect. Now that it’s happened, will Ukraine remain interesting for the U.S. business-wise?
I will say, yes. U.S. businesses have their interest here. We talk to them regularly and they’re not interested in leaving, and they would like to expand here and their work here does not necessarily depend upon the administration in Washington. Though we will be working closely with the administration to keep them engaged with Ukraine, supporting Ukraine particularly in the area of investment, making an easier business environment. So I believe U.S. companies will stay and their interest won’t change because of the change of administration.
We know that some European companies are going to leave Ukraine because they are not satisfied with the reforms, government officials, their policy, the economy, currency rate etc. But you are telling that U.S. businesses want to invest and stay here. What is the difference in their approach?
U.S. business community is very eager to stay here and expand but for the reasons you just mentioned they are not putting a lot of new money in here in terms of budgets, inventory and construction but they are not leaving. Our businesses are very internationally orientated. They see 45 million people here… You’re pretty well familiar that Cargill wants to put up a new port here, Bunge has just opened up a new facility, Monsanto and DuPont just built new seed processing facilities, and we know of a lot of plans in terms of river transport, railroads, where they got plans to move in here as soon as there are some new arrangements with the government. We find business community is very positive about Ukraine, we just need a few more changes here to break some of the road blocks so that a lot more money could come in.
What sectors of Ukraine economy are most interesting to potential U.S. investors?
It is our opinion after we talked to U.S. businesses and others that 75 % or more of the investment in Ukraine in the next two or three years will come from companies that are already here or through those companies. That’s because if the companies that are already here don’t invest that’s not a good signal for others, so our main interest is how the companies that are already here are going to expand. They know how to do business here and they know what the risk is. With a little better business environment we think more money can come in. So, the No.1 area would be agribusiness all the way from production to consumption, another big area is infrastructure – railroads, ports and rivers. Huge amount of money would like to come in to increase river transport, build a thousand of railcars here, and of course everybody is interested in good port facilities here so that we can move more goods, faster, cheaper and that, of course, is a great export boom for Ukraine and has a massive ripple effect for economic development.
I recall such U.S. companies as Chevron and ExxonMobil. They left Ukraine, didn’t they?
They did. Energy is one area that U.S. companies have been very interested in but have been not very successful in. And there are some companies that are very interested in gas production but Ukraine still has a gas tariff that is not competitive with the neighboring countries. Chevron left partly because they didn’t feel the government of Ukraine was cooperative enough and then, of course, world fuel, energy prices dropped dramatically and it was going to be very expensive for them to develop western Ukraine and they were very unsatisfied with the Ukraine government. Shell abandoned their area partly because of the conflict in eastern Ukraine, partly because of the worldwide drop in energy prices, worldwide drop in demand. ExxonMobil was going to do offshore drilling but they never got a contract with Ukraine government and the Mr. Putin came in, which suddenly made that area not very attractive. So, that is not a major area for U.S. companies right now, unfortunately. U.S. companies are mainly in agribusiness, consumer goods, IT work, not just outsourcing but also developing IT industry here. There is tourism industry once it picks up to expand adequate tourist facilities. Our pharmaceutical companies are very pleased with the new acting minister of health, thinking there will be an improvement in their ability to do business here.
Regarding the energy sphere, it seems to me that there is also Westinghouse that is operating actively here.
Half of Ukraine’s electricity is from nuclear plants. Westinghouse cooperated with the U.S. government to develop the only fuel made outside Russia that works in nuclear reactors. Many of the obstructionists in your government and Russians are trying to keep Westinghouse out of here and have a minimum presence. But nobody was happy that you were buying all your nuclear fuel from Russia and you were shipping all your nuclear waste to Russia - that was not a good competitive situation. We think that Westinghouse should have at least half of your nuclear fuel business, now they have around 20%, but they do have some new cooperation where they’re going to work with your government to expand and improve and make more safe your nuclear reactors. So they are the major player right now in energy because half of the energy comes from nuclear plants.
Back to the U.S. election. After the announcement of the outcome of the U.S. election the world has divided to “before” and “after”. Many democrats showed doomed attitudes. How dramatic could be the changes?
Washington has not seen a political situation like this in my lifetime. There is going to be a major change of personnel. But the U.S. is very resilient. We have a lot of checks and balances. No matter what we think the U.S. is going to come out OK in this situation, it will take a while for the transition but the U.S. is going to remain strong and we will do everything possible to increase the support for Ukraine, particularly in the military area.
As we know Donald Trump has no great experience as a politician. In this relation, some experts say he can be easily manipulated by more experienced Republicans. What is your opinion in this regard?
Mr. Trump is not a politician but I think we underestimated him. He came in as a candidate, and most people did not take him seriously. But we just found out he won the election. He outmaneuvered all other candidates, most of the Democrat candidates decided they would not be going to run because Hillary was invincible. Bernie Senders at the end of his career decided to run and proved that she was not invincible. And then Trump comes along proves that she is not invincible. So all of the professional politicians have got it wrong in underestimating the Americans’ frustration with bureaucracy. Trump has proved that he is the guy who can shake up Washington.
Had Bernie Sanders competed with Trump, he could have won the election. Do you agree with that?
That’s like a Monday morning quarterback in football, as we say. That’s speculation, without question nobody took Bernie seriously, either. And he was able to run a very strong race against Hillary who was more of an established line Democrat. Bernie was much more liberal. He was also an instrument of change. He wanted to change Washington one way, the Republicans wanted to change it another way. He proved that there is a massive amount of voters out there that liked him, not Hillary. But Bernie didn’t get the nomination.
Many people say Trump has ties to Russia, to Mr. Putin personally… What do you say about that?
There is no question that Trump is very independent. He’s done business in many countries. He made some comments which were of concern to some people. But there is no question that he did not have anything to do with asking Mr. Putin or promoting Mr.Putin to be involved. Mr. Putin knew himself that Hillary wasn’t his friend. She made this very clear when she left the position of Secretary of State. She wrote a memo which basically said “beware of Mr. Putin”. Putin’s intelligence people could have gone into the internet, they could have grabbed all those emails and pass them to Wikileaks. We can’t put anything past Mr. Putin. He likes to be involved in elections in many countries. He likes to be involved in Ukraine, Syria. He wants to destabilize Europe. He’s a master chess player. So I wouldn’t put it against him at all that he did some of those things to try to influence the election in the U.S. But nobody has any idea that anybody in the U.S. asked him to do that or supported him in doing that. I think Mr. Trump and his advisors are going to take a look at the world situation. They’re going to give him a lot of briefings about Mr. Putin and what he’s done. And I don’t expect any concessions to Mr. Putin. Sure, Mr. Trump says he’s going to work on some new agreements with the EU, NATO, and Putin. He’s looking for some kind of a new era with lots of folks, not just with Mr. Putin. But I think he’s going to be pragmatic and he’s not going to sell out the U.S. interests to anybody, let alone Mr. Putin.
Donald Trump outplayed the Republican elite, what effect could it have for his future decision making, his relations with Congress?
No question, he has less personal ties with the Senate and the Congress than any candidate. Obama came out of the Senate. He knew a lot of people there. Actually, Washington is an insider city, it’s who you now and who you work with. This is a new situation, totally opposite to what it would have been with Hillary. I think Trump is pretty pragmatic. The House speaker and he representatives give only a lukewarm support for Trump. And of course, without Senate and the Congress he cannot just do what he wants - build the Wall, cancel ObamaCare or whatever. He’s got to have support; he cannot do that by himself. That’s unlike Mr. Putin who has total control in Russia – economically and politically.
Some of Trump’s friends - Paul Manafort, Carter Page and Michael Flynn – have very close ties with the Russian Federation. Can we expect that these people will influence Donald Trump’s decision making?
Mr. Putin spends in Washington huge amount of money for propaganda, consulting firms. And there is no question he will be very active in all fronts to influence the new administration. I don’t think Mr. Trump will be overly suede. Putin has unlimited resources, he is very strong, he is very effective, so we’re going to tell everyone to be very aware of Russian influence in Washington and be very concerned about that.
Can you elaborate on Russian lobby in the U.S.?
The Russian lobby in the U.S. is very strong. As you know, most European and U.S. corporations do business in Russia. Most of our corporations have invested 200 times more in Russia than Ukraine. Business likes to do business. We know a lot of German companies that would like to see [anti-Russian] restrictions reduced. It is not because they support Putin but because of hard core business decisions. But Russian lobby in Washington has always been strong, and under Mr. Putin it was strengthened. The main signal of those who support Ukraine will be “be alert” “be aware”, watch out for the Russian influence because it’s huge and it’s well-funded. Russian forces or pro-Russian forces are very powerful not only in the U.S. but all around the world.
Can you name U.S. companies or politicians that are openly pro-Russian?
Well, whether you say it’s pro-Russia or it’s pro-business… The U.S.-Russian business council has their annual meetings in San Francisco and if you look on their program you will see logos of 50 well- known U.S. corporations, who are supporting that annual meeting. Are they doing that because of politics or Mr. Putin? No, they are doing that because of business opportunities. Of course, they want to do business in China, Russia in Iran, and other places. I am not going to put a big black brush across them or start calling names but we do see influence because Russia’s so big in Washington to open it up more for business and to not have these conflicts to become more expensive. Because Putin is a dictator, he doesn’t have to go to Duma and ask to attack Syria. He just does it. To destabilize eastern Ukraine? He just does it. So he’s in many ways a very powerful and destructive person and a very evil force to deal with.
Can we expect that these organizations you mentioned will become more influential?
Just like when Obama was elected and he appointed Hillary Clinton the Secretary of State, they all said “let's have a reset with Russia”, but it didn’t work. Every administration tries to see if we can improve relations, and every country comes in and says that this is the chance for us to start right over. And there’s no question that Mr. Putin wants to have all sanctions canceled. So he will do all that he can.
Do you believe a new cold war is coming between the U.S. and Russia?
To me, there is already a new cold war. Mr. Putin has made it known that he believes the fall of the Soviet Union was the biggest disaster of the century. He’s also made it clear he wants to strengthen Russia, saying “all of my neighbors are in my zone of influence”. Instead of focusing on the economic development of Russia, which is huge, which needs every penny they can come up with, his main purpose seems to be to expand the power of Russia, and he has made this no big secret. He has a grand strategy, which is to block the power of the U.S. and Europe and to embarrass these countries as much as possible.
Can we look at Trump’s win as a signal to Ukrainian establishment to count on our own possibilities and take full responsibility for all that is happening in Ukraine?
Those of us in the business community, the U.S. Government, all friends of Ukraine have been telling Ukraine since the Orange Revolution: “You, guys, need to do more, you need to clean up your own act, you need to improve your economy, to make it easier.” Of course, that got frustrated when Yanukovych came in, but now after the Revolution of Dignity, the No.1 message from the friends of Ukraine is “We have done everything for you, we’ve stayed with you, we now got the IMF back involved with billions of dollars, the U.S. has guaranteed $3 billion of your securities, we’ve put all this money in, now it’s your turn.” [Commerce] Secretary Penny Pritzker came here three times, and her message was that the U.S. had done about all we could do, and now it is Ukraine’s turn. Only then will we come with more help. And Europe’s message was the same. Ukraine fatigue has started again in Europe because they had huge problems themselves. And the U.S. has the crises, we have the huge crises with North Korea, Iran, Afghanistan and Iraq, so all of a sudden Ukraine gets pushed down because of all the other world problems. Top message to the world is that your best defense against Putin is to build a strong Ukraine. We want to help you build a strong Ukraine but we cannot do it by ourselves, you’ve got to do more. And are they getting frustrated with this government? Yes, they are, thinking they could have done more, they should’ve done more to strengthen Ukraine internally. So the message ever since the Revolution of Dignity is that you’ve got to get your act together, you need reforms, you need to do more for yourself before we can do more for you, and that is still the message. And that will be the message of the new administration, no question about it.
Can we expect that cooperation with the IMF, WB, and other financial institutions will become more robust?
The IMF put a huge package together for Ukraine, which was not just the financial decision. It was also a political decision for the members of the IMF to support Ukraine. So, you can’t really ask them to do much more and Ukraine doesn’t want to borrow more money. You need to create wealth within Ukraine. I don’t see how you can increase the IMF program. The WB has had a huge program here, the big problem is that Ukraine underutilizes the World Bank. EBRD is the largest investor here and they’ve really tried to do a huge amount of work here and the problem is they don’t have much good business proposals to fund, so EBRD can’t do much more until there is a better economic environment here. You don’t want the IMF to do more because that is just more borrowing. You want Ukraine to have economic self-sufficiency. Open private investment corporation says it is ready to fund a lot more business investments in Ukraine but they’ve got to be reasonable, they’ve got to be bankable, they’ve got to make some sense. EBRD needs from the government better proposals. And of course the big financial houses like to do more but the business environment is still too risky, it has not improved enough. A major issue is that everybody says we are sick and tired after 25 years of continuing to be victims of corrupt judges and corrupt prosecutors, we are tired of that. Ukraine doesn't realize that we can go to Poland, we can to the Czech Republic or other places to put our money with less risk. Secondly, they say they are tired of the harassment of the tax administration and corrupt, inefficient bureaucracy left over from the Soviet days. So most investors say that they have no new money for Ukraine for 2017 and that they’re going to wait for 2018. So frankly the world’s best economies and the world best financial institutions do not do much to step up support for Ukraine until Ukraine does something for itself. Our defense industry says that your defense industry in Ukraine is so bureaucratic and so secret you can’t do deals with them; our space industry says the same thing. Frankly, it is not the world that’s come up short for Ukraine. That’s Ukraine that’s come up short for Ukraine.
Who of the candidates for the high posts in the new U.S. Administration could play a positive role for Ukraine and who can cause trouble?
The best support Ukraine has is on the Capitol Hill. We have a lot of strong senators and strong congressmen who have urged the U.S. Government to do more for Ukraine, particularly in providing you with defensive weapons. The White House had a limit on what they wanted to provide for Ukraine in response to Putin. Senator McCain is back in the Senate, he’s a great friend of Ukraine. He’s in charge of the Senate Armed Services Committee. Senator Corker is back. He’s a strong supporter of Ukraine. I think the Hill will be putting pressure on the Administration to do more for Ukraine and particularly in terms of Ukraine’s defenses. It’s going to be a big battle but I think that the new administration will be inclined to provide support. I hope the White House will not be an obstacle. Of course, Putin will be using all of his powers to convince people not to do that. So that is going to be a big battle.
What are your recommendations to the Ukraine government on how to stimulate economic development and attract new investment?
Number 1 area we would like to see is much more massive reforms in the courts, judges and prosecutors. There have been some reforms but they are not massive enough. There are a lot of judges who have ruled against international corporations, with bribes, that are still in place. Ukraine needs to come up with two or three things it can do, which would draw the line of demarcation and get the attention of the international business community. Because international business community says “yes, you have done a lot but it’s not enough for Ukraine to sit and brag of what they’ve done”. The International business community will vote with their money. Are they leaving Ukraine? No. But are they voting with new investment in Ukraine – No they are not. The government needs to recognize that and, secondly, there must be improvements in tax administration because these guys can cotton these cases for up to six years, and that has a very negative influence.
Did you tell that to Ukraine’s top taxman Mr. Nasirov?
Yes. There is a very negative effect. For a long time, the National Bank said you can’t take any earning from here, there have been just unbelievable restrictions on currency transfer, and they claimed there had been a good reason for that. You can’t even imagine how many decision makers told me: “Don’t even talk to me about new money for Ukraine until we can take some earning out. Maybe we don’t have earnings or maybe we don’t want to take them out but we can’t work with the fact that we can’t get them out.” We got one U.S. business who wanted to make a lot of money here and they prepaid their taxes under the law, now they want their money back but they can’t get it back, as Ukraine government doesn’t put the money in the budget to pay people back their prepaid taxes. It is amazing how Ukraine fails to realize that the devil is in the details. When you can’t get your taxes back, when you’re involved in a five-year court case, when they are threatening prosecution against your top people, this sends quite a negative signal to headquarters. They think: “We have 25 courtiers where we can put money and Ukraine is in the bottom list”. This issue irritates the decisions makers. It’s all about the protection of private property. It’s that simple.
Denys Iatsyshyn, Taras Kosiuk