When Ernst Reichel speaks, people in Ukraine tend to listen, and just not because of his debonair Hollywood actor persona complete with silver-white mane.
As Germany’s ambassador to Ukraine, he represents the political and economic heavyweight among the European Union’s 28 nations.
So, even though he couches criticism in diplomatic equanimity, when Reichel says he’s disappointed about something in Ukraine, it is probably a good idea for Ukrainian politicians and public officials to listen. And what’s disappointing him?
In an interview with the Kyiv Post ahead of the Oct. 3 Unity Day holiday, celebrating the date of German reunification in 1990, Reichel identified some troubling areas on the Ukrainian domestic front.
One of them is Ukraine’s inability to unfreeze the $17.6 billion International Monetary Fund lending program for more than a year, held up until a fiscally responsible 2019 state budget is passed and household natural gas prices are raised to market levels.
The impasse with the IMF — which has disbursed about $8.4 billion in the four-year program that expires in March — also holds up assistance from the EU, whose budget is 21 percent financed by German taxpayers, and World Bank assistance as well.
“The IMF is really crucial because it’s key to other sources of aid coming in,” Reichel said. “I hope very much that the agreement will restored and renewed. Otherwise, it’s likely to become difficult in terms of Ukraine servicing its debt.”
Step forward, step back
On the anti-corruption front, among EU conditions in a 1-billion euro assistance package, Ukraine took “one big step forward” in passing legislation to create an independent anti-corruption court. But passing the law is not an end in itself.
“We will look carefully how it’s implemented and at what pace,” the ambassador said. Ukraine also took “a step back” because Nazar Kholodnytsky, the head of the Special Anti-Corruption Prosecutor’s Office, has a “contested reputation and does not have the trust of those who care most about anti-corruption.”
The National Anti-Corruption Court of Ukraine secretly recorded conversations in which Kholodnytsky allegedly obstructed the work of his prosecutors and tipped off suspects, sabotaging ongoing investigations of major crimes. Yet Kholodnytsky, who claims to work autonomously from General Prosecutor Yuriy Lutsenko, remains on the job.
“If we had such an institution in Germany, and similar information in Germany, that person would one way or another not be in office,” Reichel said.
When asked whether Ukrainian President Petro Poroshenko knows about Berlin’s position, he said: “I think the president is fully aware of Germany’s concerns.”
The “one step forward and one step back” problem extends to “trouble given to anti-corruption activists,” including numerous physical assaults on them in Odesa and other places, as well as problems with electronic asset declarations.
Electronic asset declarations are required of 2 million politicians, public officials and even applicants to government jobs.
The public disclosures are part of an anti-corruption drive meant to deter bribery and force accountability for those with unexplained wealth.
The problem, however, is that few — about 800 in all — asset declarations have been verified and the Ukrainian government has been resisting automated verification technology available, which would allow for mass verification.
Without improved practices, the EU will continue to put aid on hold. Ukraine needs to put in place “full-scale systemic verification of these asset declarations,” Reichel said.
’Not all doom & gloom’
On other fronts, the relationship between Ukraine and Germany is blossoming, economically and culturally. Germany counts at least 2,000 companies doing business in Ukraine, employing more than 60,000 people, and pegs foreign direct investment into the country at $1.6 billion and growing, while bilateral trade topped $7 billion in 2017.
Car parts production plants in western Ukraine are among the most numerous and notable employers.
“So that’s good news. This kind of investment has to solidify in clusters, where one can move from labor-intensive manufacturing to more capital-intensive investor production,” Reichel said. “One of the difficulties our investors are facing is a shortage of labor, which is why they’re moving from the west to other parts of Ukraine, because labor is scarce in the west.”
Politically “it’s not all gloom and doom” either, Reichel said. He expects that, with presidential and parliamentary elections both scheduled to take place in 2019, the pace of reforms will slow down as the campaigning intensifies. But he is confident that Ukraine will conduct free, fair and competitive elections.
Russian interference is a big concern, he said, but the world is already alert to the threat and so in a better position to counter the Kremlin’s attempts to sabotage.
“Step 1 is the uncovering. That has taken place and credit is due to the United States in particular on this,” he said. “My feeling would be the uncovering of this would have a deterring effect. The way it’s backfired for Russia in the United States is obvious.”
Hungary, Poland
As the first among equals in the EU, Germany is looked to for leadership in all areas, from military to economic and, not insignificantly, in enforcing Europe’s democratic values.
Currently, two EU members — Poland and Hungary — are retreating democratically and moving in the direction of autocracies.
The EU can suspend aid and membership, but it would require unanimity, so Poland and Hungary could veto sanctions against each other.
Still, Reichel said, it is an “achievement in itself that the EU put the countries on notice and that this process is going on and they have to justify what is going on.”
He views what is happening in Poland and Hungary as part of a global problem “where consensus on values is eroding within societies and also among countries, and I’m not excluding Germany.
We will have to find ways to deal with this phenomenon and mitigate and turn it around again if possible. I am not sure EU treaty mechanisms are the most effective tool at our disposal to counter this development.
This is not only a matter of legality. It’s much more of philosophy and politics and political debate that needs to take place as the problem is worldwide.”
On Syria, Germany has taken in more than 1 million Syrian refugees, triggering the rise of anti-immigrant political forces challenging Chancellor Angela Merkel.
Reichel said Berlin is “working very hard to avoid this final assault on Idlib (a province not under Syrian dictator Bashar al-Assad’s control) because of the immense humanitarian consequences it would have… We are relieved that we don’t have geopolitical stakes in Syria. We have the luxury to care about the people.”
Merkel has also talked about the need to strengthen Germany’s military option and to prevent further chemical weapons attacks, such as the ones that the Assad regime has used against its own citizens.
Nord Stream 2
But the biggest contribution that Ukraine wants from Germany, perhaps, is something that Berlin is not willing to deliver: calling off the Nord Stream 2 pipeline project under way.
When completed, perhaps by 2019, the undersea pipeline will double the capacity of the existing line, to some 110 billion cubic meters of gas annually.
Ukraine is worried that, combined with the TurkStream project to the south, Russia will completely bypass its land-based gas transportation system, at a cost of $3 billion yearly in transit fees — a substantial part of the $128 billion economy.
Reichel notes that the project is not a government one, but one involving a consortium of five private European companies.
But it is an argument that critics find unpersuasive. Merkel has recently expressed more concern about the political and financial implications, which is why Reichel said that she has “started to broker an agreement” with Putin to guarantee that Russia “will continue to use the Ukrainian gas transit system.”
“If there is damage to Ukraine, we will do what we can to mitigate it,” Reichel said. But he also finds the arguments against Nord Stream 2 inconsistent: While Germany is not supposed to be doing business with Russia for moral reasons, according to Nord Stream 2 opponents, it’s somehow morally acceptable for Ukraine to keep earning gas transit revenue from Moscow.
“The largest trading partner of Ukraine in 2017 was Russia,” Reichel noted. “If you come to the moral conclusion that any trade with Russia needs to be forbidden or should not take place, then this is very likely to turn against Ukraine heavily… When you sanction other countries, one of the first considerations is that you harm the sanctioned country more than you harm yourself.”
Commercial self-interests also factor heavily into the opposition, especially from the United States, which is trying to sell more liquefied natural gas to Germany. In his address to the United Nations General Assembly on Sept. 25, U. S. President Donald J. Trump slammed Germany again over Nord Stream 2, saying: “Germany will become totally dependent on Russian energy if it does not immediately change course.”
While the share of energy that Germany gets from Russia will increase with Nord Stream 2, Reichel notes that there may ultimately be a competitive benefit to the additional pipeline.
“It’s obvious that, by an additional line to Nord Stream, you have more ways of sending gas to Europe than before, so the competition of pipelines is larger, not smaller, by building Nord Stream 2,” he said.
The U. S. has threatened sanctions against firms involved in the Nord Stream 2 project. While Poroshenko has encouraged America to take this course of action, such a development might backfire on Ukraine, the ambassador said.
“Ukraine relies heavily on Western cohesion,” Reichel said. “This cohesion is put under a lot of stress if allies sanction each other.” The threat of U.S. sanctions, combined with Trump’s threats to harm Germany’s lucrative car export business with higher tariffs, have turned German public opinion more against the U.S. president than against the Russian president, according to at least one German poll.
Reichel said he thinks the damage is “temporary and can be repaired. The foundations of the German American relationship are very strong.”
Cultural ties flourish
As for Ukraine-German relations, they seem to be progressing well on many fronts. Germany supplies significant bilateral aid — 1 billion euros in grants and other forms of assistance since 2014, and 500 million in preferential loans.
“That’s really quite a lot of money and it shows we really care about this country and we consider ourselves friends,” Reichel said.
“We are not indifferent to what happens here and how the people are doing.” If Europe is a village road, Ukrainians “are living two houses down the road. We are like neighbors. While due to historic events, this neighborhood hasn’t played out properly for a long time, now the obstacles have been removed and things are turning to what has always been expected.” Also in the non-governmental sector, Germany’s political parties have foundations that “work quite a lot here in Ukraine.” Ukraine, for instance, has the fifth highest number of students studying German as a foreign language in the world. A network of schools and language clubs in Ukraine numbers at least 25, many in Kyiv. “All of that is developing really nicely,” he said. “I am pretty happy and proud of them.”
