A Strategic Opportunity For Ukraine

There are neighborhoods in Kiev one might easily mistake for Paris, London, or New York: intricately decorated Victorian apartment buildings and townhouses mingle with sidewalk cafes, small parks and monuments, mid-century office blocks, and glass-fronted modern office towers.
And stretching skyward from the crests of Kiev’s famous seven hills are its unmistakably Slavic monuments—the onion domes and golden crosses of St. Michael’s and St. Sophia’s cathedrals, and the Caves Monastery.

This ancient and modern city between East and West has a style all its own, which locals call “Kiev eclectic”—a charming blend of the many influences that have shaped this place for more than a millennium.

Kiev’s eclectic architecture is a convenient metaphor for Ukraine itself—a country that blends influences from the Latin and Orthodox worlds, from the Black Sea and the Steppe, in a rich and complex political culture.

Like the city of Kiev, Ukraine’s politics may be tumultuous and notably short on organization and strategic planning, but they exude a sense of energy and potential nonetheless.

As Kiev has expanded upward and outward in recent years, with high-end cars, swanky restaurants, and nightclubs seemingly on every corner, Ukraine as a whole has begun to feel its oats as a large and important country in Europe.

However, as the double digit economic contraction of 2008-2009 illustrated, the easy gains of the post-Soviet period have come and gone, and now, without a more robust strategy for growth and development, the future is bound to be less bright.

Ukraine stole the global media spotlight with its 2004-2005 “Orange Revolution,” when tens of thousands of citizens took to the streets, camping out on Kyiv’s Independence Square, to protest alleged manipulation of the polls by the outgoing president, Leonid Kuchma, and his Russian allies, in support of then-Prime Minister Viktor Yanukovich.

Instead, the protests brought to power an opposition coalition led by former Prime Minister Viktor Yushchenko and former Energy Minister Yulia Tymoshenko.

Whereas Kuchma and Yanukovich tended to enjoy support from Orthodox Christian Russian speakers concentrated in Eastern and Southern Ukraine, more Yushchenko and Tymoshenko backers came from Ukrainian-speaking Catholic areas in the West and North.

However, a majority of Ukrainians, drawing on ethnically mixed populations in Kiev and central Ukraine, initially supported the Orange government because they believed in its platform of government reform and engagement with the West.

But the story of the Orange period in Ukraine unfolded with ever more missed opportunities, paralyzing political infighting, and dashed hopes. Most of the promised reforms never occurred, or were compromised from the outset by still rampant corruption.

And though Yushchenko managed to win many admirers in the West, his headlong drive for NATO membership antagonized Russia. By the end of the decade, even many of those who had braved the bitter cold to support the Orange revolutionaries five years earlier had abandoned Yushchenko and Tymoshenko.

This was just the opening needed for Yanukovich and his Party of Regions to stage a dramatic comeback. Promising stability first—and trading on his own ethnic ties to Russian-speaking Eastern Ukraine, including the stereotype of leaders from the Donbass mining region as effective managers—Yanukovich won the presidency and control of the Verkhovna Rada (Ukraine’s parliament) earlier this year.

Since Yanukovich came to power, the debate on Ukraine in Washington has focused almost exclusively on the country’s East-West divide, Russia’s rising influence, and the new president’s apparent aim to establish a tightly controlled, Russian-style political system.

Although Ukrainians recognize and bemoan the risks of regionalism, rampant corruption, and Russian encroachment, their top priorities are renewed stability and economic recovery.

There is a chance both visions will be borne out, and stability will come at the cost of a political system drifting toward authoritarianism, the sort of bargain on which Russia’s Vladimir Putin built his “vertical of power.”

Yanukovich may seek to strengthen central authority, but he is unlikely to give too much away to Russia, since his own ambition would be poorly served by ceding Ukraine’s sovereignty or playing second fiddle to the Kremlin.

The real challenge facing Kiev today is to deliver on the promise of effective government in the short term, without sacrificing Ukraine’s long-term strategic interests. Unfortunately, it’s been the other way around so far.

On foreign policy, the closest thing to a national strategy has been Ukraine’s professed interest in partnership even though it is not willing to align with Russia or the West: Kiev will not join any regional security block, but will still cooperate with NATO and Russia in cases where it makes sense to do so.

Thus far, Kiev has indeed struck a careful new balance with Russia and the West. In all likelihood, Yanukovich believes that by extending Russia’s lease on the Sevastopol naval base to 2042, and entertaining proposals to merge Ukrainian and Russian gas, nuclear, and aircraft industries, he has avoided a more hostile Russian takeover attempt of Ukrainian industry.

Likewise, by continuing military-to-military cooperation with the West, and announcing wide-ranging reform initiatives, Ukraine’s president may hope to encourage Washington and Brussels to turn a blind eye to plundering and corruption by his inner circle.

Whether or not these maneuvers balance one another in the short term, they represent a triumph of tactical over strategic thinking and attest to the glaring absence of an independent strategic direction in Ukraine’s foreign policy.

A similar absence of strategic thinking is evident in Kiev’s domestic policy agenda. Although the improving global economic climate and substantial international loans will probably help Yanukovich deliver a portion of the stability and recovery he promised, Ukraine’s economic future lies with Europe, already Ukraine’s second-largest trading partner after Russia, and a promising source of investment and high technology.

Yet without deep structural reforms in Ukraine’s economy, European integration will remain a slight possibility.

Ukrainian officials, however, continue to use Europe as a scapegoat, arguing that the EU’s unwillingness to give Ukraine a road map to membership saps the popular support necessary to fight corruption, reform state contracting and subsidies, and impose budget cuts across the board.

This is simply wrong. With or without EU membership, Ukraine must reform its red-tape laden regulatory system, increase transparency, and protect small- and medium-sized businesses from plundering. Otherwise, the country’s best and brightest talent will continue to depart for greener pastures in the West, or simply tune out from public life, perpetuating a cycle of social, political, and economic stagnation.

Now more than ever, Ukraine needs strong, sustained engagement from the United States and Europe to encourage its leadership to think strategically. Europe can start by calling Kiev’s bluff and presenting clear, objective standards for Ukraine to meet if it wants closer economic integration and reduced barriers to eventual EU membership.

This, at least, can strengthen voices within Ukraine already calling for the reforms necessary to move toward European integration.

The EU’s newest members in Central Europe should also extend a hand to Ukraine and help mount a diplomatic and public relations campaign to combat insidious anti-Slavic prejudice in “old Europe.”

And even if a road map to EU membership is not possible, Europe should push to conclude a visa-free travel agreement that will enable Ukrainians already working in the West to travel home more easily; they will bring back their personal experiences of more accountable government, while European companies will enjoy better access to a highly skilled Ukrainian labor force.

The United States has a perfect vehicle for robust engagement in the U.S.-Ukraine Strategic Partnership Commission, created at the tail end of the Bush administration but still relatively anemic.

Under the auspices of Commission working groups on economic cooperation, science and technology, and governance, the United States should provide Ukraine with consistent models and programs demonstrating the linkage between accountable, transparent governance and highly successful U.S. research, entrepreneurship, and industry.

The United States can also incentivize reform by pushing hard to protect the interests of U.S. investors already in Ukraine, while encouraging U.S. capital markets to take an interest in mid-sized Ukrainian enterprises as a bulwark against hostile takeover attempts by Russian business.

Lastly, as the key guarantor of European security and a lead NATO ally, the United States must hold Ukraine to the high standard of a pivotal regional power. After the U.S.-Russia “reset,” joint U.S./NATO military exercises with Ukraine and even with Russia should be seen as mutually beneficial.

Indeed, the United States, Europe, and Russia should all demand that Ukraine actively participate in anti-trafficking and border security programs in the Black Sea region, and play a prominent, proactive role in the resolution of ongoing regional conflicts, particularly in neighboring Moldova.

U.S. and European efforts to foster strategic thinking in Ukraine will not pay off quickly, but it is worth their time and attention. Mirroring the architecture of its capital city, Ukraine as a whole is an eclectic and sometimes chaotic place, but it is full of beauty, energy, and potential.

Much of what has already been built was done haphazardly, often with the taint of corruption and abuse of power. But that’s no reason to tear it down or turn away from it.

What’s needed now is to help Ukraine adopt a strategic vision on which to build the next chapter of Ukraine’s fascinating story. America, it has been said, was founded as a “shining city on a hill.” Kiev has seven hills already—now it needs to shine.

Eric back in Kiev from Odessa

After spending two years in exile in Odesa, Eric Aigner opens a new club in Kyiv.
The man largely credited with establishing Kyiv’s affordable and unpretentious restaurants and nightclubs in the 1990s has returned to the capital after more than a two-year hiatus in Odesa.
Eric Aigner is back with his trademark Ho Chi Minh beard and easygoing smile. And he brought with him a team of bartenders and servers from Odesa to open a nightclub on Aug. 24 at the Ultramarine entertainment complex.
Banking on the reputation he earned in his heyday for managing places with fun staffs and informal Western-style service, it’s no surprise why the club is called Friends of Eric. As the venue opened its doors on Ukraine’s 18th birthday, club-goers, consisting mostly of Aigner’s friends and acquaintances, were asked to write words of greeting on bricks as they were stacked diagonally using cement.
Located on the mezzanine floor of the complex, the club has an elongated lounge area of sofa chairs standing on plush red carpeting, and has an identical second floor accessible on both sides by spiraling chairs. According to Aigner, the joint is designed to imbue a relaxed atmosphere of conversation and down-to-earth fun.
The same goes for the service. Aigner said he brought a team of employees with him from Odesa because people there are more laid back and it’s not beneath them to talk to clients. “I don’t need bartenders twirling and tossing mixing glasses or bottles,” Aigner said. “The idea is to be happy. It’s very important to create an atmosphere where people could meet other people, tell jokes and converse.”
He says fun is what brought him back to Kyiv. He says the happy atmosphere is missing here. “I never thought my friends would say that they miss my clubs. This is an honor to come back and run a club they’d like to visit,” the 46-year German native said.
The timing of the club’s opening is questionable in an already saturated market and given the financial crisis, which might heat up again in autumn. “I don’t need rich people coming here,” Aigner said. “I’m not afraid of the crisis, we have reasonable prices; it’s very important to have middle class level people.”
Not everyone is glad to see Aigner in Kyiv again. Former partner Ken Carter of New Zealand said Aigner defrauded him of $42,500. Carter filed civil charges last year and has subsequently won a court decision in May 2008 ordering Aigner to pay him that amount.
“I want justice, I want to stop Eric’s dishonest ways and to put him behind bars,” Carter said. “He’s a criminal.”
Aigner has called the ordeal with Carter a “farce” and said Carter ran their businesses, Tapas Bar and Blues Bar, into the ground. “He [Carter] wanted to be the director. I said we’re partners.”
The restaurateur has had tumultuous histories with former partners, dating to his first partner Ihor Pazepa, with whom he opened his two first bars in 1996. They had a falling out in 2000 stemming from a dispute revolving around their bar, Al Capone in the Podil district.
Pozepa said he locked Aigner out of the club after a series of disputes over money and personal matters.
In an archived interview with Kyiv Post, Aigner contended that Pozepa had been increasingly reluctant to pay him his part of the profits. Both sides went their separate ways after that.
“I don’t believe in contracts,” Aigner said back then in a Kyiv Post article. “Here, they mean nothing. They are just something to flush down the toilet.”
Soon thereafter, Aigner hooked up with his most longstanding partners to expand the Eric’s Family chain of restaurants and clubs which eventually numbered up to 18 different ventures. The chain has been renamed to Love and Hunger (Lyubov i Golod, www.skukakaput.com.ua). Many of its restaurants have come and gone but others still are running: Art Cafe 44, Bierstube, The Cave, Shnitzel Haus and others.
Partners Vladyslav Maksimov, Oleksandr Trush and Vitaliy Dubenko publicly divorced Aigner late in 2006 in an effort to change the brand’s image and attract new clients. According to news reports, Dubenko said Aigner couldn’t fulfill his responsibility as Eric’s Family’s manager, which lead to losses of hundreds of thousands of dollars.
This is when Aigner launched the New Eric’s Family brand, which also sputtered culminating with disagreements with Carter. Other former friends and clients of Aigner’s said he had borrowed money from them to open new restaurants in Kyiv, only to see them flop. He admitted he borrowed money from friends and said he will pay back as soon as he can. “This is what friends are for,” he said.
Odesa was next on Aigner’s list where he spent over two years on various ventures. There he wrote a book called Mein Quest (available at www.predmet.com) about his life in the former Soviet Union dating to his business travels to Russia in the early 1990s, and printed two thousand copies in Ukrainian.
He also ran Oreshek (The Little Nut) for six months modeled after a bar in Kyiv called Orekh (The Nut). He soon had a dispute with his partner’s wife who he said came back from a Kyiv business seminar and thought “she was the sole director of the place.”
It was during this time that Aigner launched the Tango & Eric Party Service in Odesa, an event and catering company, which – again – faltered once the financial crisis hit in full swing and orders plunged rendering the venture unprofitable.
Aigner said Ultramarine’s owners are his partners in his newest endeavor. He said he does everything from managing the club to being its creative director. “They’ve given me complete freedom,” he said.
“All I want once a person leaves my club is for them to feel completely relaxed, filled with positive " Aigner Said.

Dubyna Hospitalized After Emergency Heart Surgery

KIEV, Ukraine -- Oleh Dubyna, chairman of Ukraine’s state gas company, Naftogaz, was hospitalized and underwent emergency heart surgery, Prime Minister Yulia Tymoshenko said appearing on TRK Ukraina television channel late on Jan. 23.
“The head of Naftogaz is in intensive care; he had a very difficult operation on his heart,” she said adding that stress during the gas crisis likely built up upon Dubyna.Tymoshenko said that Dubyna was under a lot of stress during the gas dispute because Ukraine's president, Victor Yushchenko, gave him "diametrically" different instructions from her government."It was very difficult for him," she adding that the president and lawmakers in the Regions party close to middlemen company Rosukrenergo purposefully tried to sabotage her chances of finalizing an agreement before the New Year.Interfax-Ukraine reported that Dubyna was in stable condition at Kyiv's Feofania hospital, were the country's elite are traditionally treated.

Classical Kiev