Economic Perspective from a Ukrainian National in Kiev
by Max Spivak, BS 07’ MBA 14’ MILR 15’ (2/25/14)
Max Spivak, EMI Fellow candidate, has taken an interest in the situation in Ukraine – a country where he and his fiancee, Kate, have deep roots. Max’s grandparents come from Ovruch, Ukraine and Kate’s family is from Kiev. While Max’s family has immigrated to the United States, Kate’s family has not. They are now stuck in the middle of the conflict.
As Max researches how business has been affected in the area and what it means to the world, he has come across some strong, and sometimes polarizing opinions. Max contacted a family member, Tanya Zherdeva, who provided us with an interview and her perspective during the week of February 17, 2014. Tanya graduated from Kiev National University Shevchenko in 2010 and Kiev Economic Institute of Management (KEIM) in 2013, and is active in Ukraine’s business community. In 2013, Tanya organized the Bridge Education Abroad Institute. Currently, she is responsible for the Educational International MBA program at KEIM.
Below is a summary of his interview with her:
Max: How do you explain the origin of the conflict?
Tanya: Totalitarianism, crime and corruption were Yanykovich’s version of `democracy`. Everyone with power lived above the law; there was humiliation and neglect of human rights; and there was government oppression. People’s patience ended prior to the recent conflict but the final impetus was shooting protesters in Kiev.
Yanykovich did not sign the European Union Association because he did not receive support in the 2015 elections nor an agreement to get a loan of 160 billion Euros. Then Yanukovych successfully obtained the loan from Russia. People started peaceful protest because of the failed European Union relationship. This may have been the end of opposition, but the police "Berkut" started applying force against the protesting students. This was the first wave of protests. After the conflict died down, the government adopted a number of laws that troubled people, and the second wave of the conflict started. This confrontation occurred in January. During this period, Yanukovych managed to receive from 3 billion dollars from Russia. However, this money never seemed to reach the national treasury, which has remained empty. The third wave of uprisings swept through when the government forced protesters to end their occupation of Maidan (Independence Square in Kiev). Protesters and the government reached a deal that they will empty the square if the activist detainees would be released. On the last day of the agreement, Special Forces of "Berkut" clashed with the remaining activists and killed the first victim. Bloody confrontations began after the government started to use firearms, after saying to the world that they do not shoot protesters. For 2 nights, snipers killed more than 150 people. This was the last straw for the Ukrainian people.
Max: What do you see as consequences of the current unrest?
Tanya: There are severe economic consequences. There is a significant possibility of economic default due to the situation in Ukraine. Government bond yields rose sharply by 25 points and insurance rates against default on national Ukrainian bonds rose 61%. The Dollar and Euro rates are also rising; and the long-term debt rating has fallen to CCC. If the political situation does not stabilize in the near future, I am afraid to even think of the economic consequences for Ukraine.
Max: Do you see any positive consequences emerging from this turmoil?
Tanya: Despite all the facts, we hope that the resolution of the conflict will lead to new opportunities. Doing business in Ukraine has almost always been impossible for foreign investors. Countries with a high culture of business were afraid of investing in the Ukrainian market.
Now the whole world is tensely tracking the events in Ukraine. News in Russian broadcast depicts the current government’s view of the situation and facts are misrepresented to the Russian society. There is no doubt that we have tension with Russia but we have not seen any other countries with significant interest in stabilizing the situation. The Russian government supports the current legitimate president. I suppose that they are not interested in free and independent Ukraine because the same revolution could take place in Russia’s future. Many Russians support President Victor Yanukovych, but his rating is falling every day.
Max: What are the motivating factors of people behind the revolution? Why are people fighting and dying for Ukraine?
1. Citizens of Ukraine fed up with corruption, which takes place everywhere. People cannot do any business without bribes and connections with the government. If you don`t have any `support` in the government, you can never succeed.
2. People want to have the opportunity to influence Ukraine. If you are not a relative of the owner of a company or the head of a department, your opinion will be ignored.
3. Business culture is totally absent in Ukraine. In the EU and the USA, verbal contracts can be a basis for having international relations, whereas in the Ukraine, even written contracts do not hold.
4. We have no social guarantees such as: medical insurance, paid sick leave, company-sponsored training, etc. In Europe, the citizens have balance between government, labor unions, and companies, unlike here.
Max: What is your current assessment of the situation?
Tanya: As we step closer to civil war, more people are leaving the Party of Regions. The more people are killed in downtown Kiev, the more marauding takes place in the streets. This is the reality of Ukraine in 2014. Could anyone imagine situation like this? People want the President to resign now but he tightly keeps his position as his sons and relatives will lose everything. The government seizes many businesses from legitimate Ukrainian owners and control plants, large companies and hotels. These businesses once belonged to the middle-class and small entrepreneurs.
We will surely benefit when we achieve international relations with EU and Russia. But for now, it`s only utopia and we have no possibilities to build normal relationships with either entities as they are not willing to cooperate with each other. Russia does not seek to have Ukraine as an independent country, and Europe does not allow for anything other than an independent country. Ukraine needs a respectable and fair leader, who can guide the country in the right direction and remove corruption from our country. If that occurs, the economy will develop and many Ukrainians who work abroad will come back home.
Only then we will have a normal life. We all live scared about our future and the future of our children. We do not want to simply survive, but we want to live. We want to be free and live in a democratic society. Hence the mentality should change. We do not know how many generations should live through the oppression and how many people should die here, but for now we have only hope and faith.
Photos from Vadim Stupak