Ambassador Ernst Reichel senses business optimism
The mood of German businesses in Ukraine is swinging to optimism, says German Ambassador Ernst Reichel.
Next week he travels to Kolomyia, a city of 61,000 people in southwestern Ivano-Frankivsk Oblast, for the opening of a second export-oriented factory by German auto parts maker LEONI Wiring Systems UA. President Petro Poroshenko is expected to join him.
"That's noteworthy, but there could be more of this," Reichel told the Kyiv Post in an interview ahead of Oct. 3 German Unity Day, which celebrates the reunification of the nation in 1990 after its post-World War II division.
For Ukraine to prosper, Reichel said that more needs to be accomplished to improve the investment climate and the nation's image.
"Ukraine has to shed this image of being a hotbed of oligarchy and corruption," Reichel said. "It's always been, in part, unfair. But it's a fact, unfortunately, that this is the perception many people have of Ukraine. A change in the society, a change in government policies, as we have seen in the Revolution of Dignity (that ousted President Viktor Yanukovych on Feb. 22, 2014). That is really what is needed. People are starting to understand that change is actually happening. For this to take root, it has to continue and be brought to the conclusion."
‘Far below potential’
Reichel said "the Ukrainian economy and foreign investment are still far below potential. The reason for this is the investment conditions are still not right… If Ukraine were able to speed up reforms, create an independent and quality judiciary and impove the things it does against raider attacks or against administrative difficulties created arbitrarily, there's much more in growth that could be achieved and much more in German investment."
Nonetheless, "overall there is optimism developing" among the 1,200 German businesses in Ukraine, most of them small-to-medium sized enterprises, the ambassador said.
"The German business community is increasingly optimistic," he said. "After we went through this hard crisis, things are picking up now. German businesses who are here, as a majority, are happy and they are increasing their engagement. Also German trade is picking up. German exports to Ukraine are picking up nicely. Also Ukrainian exports to Germany are picking up due to the (free trade) association agreement with the European Union."
Arrived in August 2016
Reichel took up his post in August 2016, replacing Christof Weil. He has experience in Eastern Europe and the former Soviet Union. He started in the foreign service in 1988. His initial posting abroad was in Leningrad, now St. Petersburg, Russia. He's also worked at the United Nations in New York and NATO in Brussels. Yet Eastern Europe is his area of specialty. "The more expertise I accumulated, the more they put me there," Reichel said. "It works out for me. It's a fascinating job I have here."
He is a lawyer by training, but practiced for only a year before joining the foreign service and getting married. He has two grown daughters. To relax and stay in shape, Reichel, 57, is an avid tennis player. "From my early age, I'm a tournament tennis player," he said.
Germany's power as the fourth or fifth largest economy and the most populous nation in Europe, with 82 million people, means that its influence extends globally.
So the Sept. 24 parliamentary election was watched closely for political shifts. The results were partly reassuring and partly alarming to many.
On the reassuring side, the firstplace showing of the Christian Democratic Union gave Chancellor Angela Merkel a fourth term. She's already been in office for 12 years, behind only Konrad Adenauer and Helmut Kohl.
On the alarming side, the pro-Russian, anti-immigration, far-right Alternative for Germany party scored the third-largest vote total, securing 93 out of 709 seats.
But Reichler said there's no need for alarm about German's foreign policy, which has been consistent despite political shifts, including support for Ukraine and opposition to Russia's annexation of Crimea and Donbas war since 2014.
With Germany sharing the lead role with France in trying to bring an end to Russia's war through the Minsk agreements, Reichel thinks there's no chance for business as usual with the Kremlin — or the lifting of economic sanctions — until peace comes to Ukraine.
"There's much less reason to worry about Germany, also after the election," Reichel said. "Government policy has always been straightforward and clear. We have been very instrumental in keeping European Union cohesion on sanctions, despite challenges that have come from time to time from one member or another."
Especially if the so-called "Jamaica coalition" comes alive — uniting Merkel's Christian Democratic Union with the Green Party and the Free Democrats — "it's even more the way I describe" in keeping the pressure on Russia, he said.
Still, German politicians regularly create anxiety in Kyiv about whether they will bow to commercial interests and ease sanctions on Russia before the Kremlin ends its war.
One of the most irritating is former Chancellor Gerhard Schroeder, an apologist for President Vladimir Putin who is also on the payrolls of Russian state-controlled Gazprom and Rosneft.
But there are others, especially in the Social Democratic Party, who harbor pro-Kremlin sympathies, including ex-Foreign Minister Frank-Walter Steinmeier and current Foreign Minister Sigmar Gabriel. Moreover, the leader of one of Merkel's possible coalition partners, the Free Democrats' Christian Lindner, has suggested that Germany should accept Russia's annexation of Ukraine’s Crimean peninsula.
Reichel himself triggered a public backlash in February after suggesting that elections could be conducted in the eastern Donbas before the withdrawal of Russian troops from Ukrainian territory.
Other parts of the quote, as published by Censor.net.ua, were less alarming: "Undoubtedly, elections should be held in those conditions that will correspond to European standards. And therefore safety, as well as other requirements regarding the electoral process, are essential. Any Ukrainian politician should be able to hold their campaign without fear. And if that is not possible, then such elections can not meet the standards," Reichel also said.
Nonetheless, taken together, the disturbing sentiments from numerous German officials and politicians, raise fears that Germany will support Ukraine more in principle than in practice.
'We are very frustrated'
Reicher said, however, that Germany will not abandon Ukraine and he acknowledged frustration with Russia, in particular.
“I am a lawyer by training. I have learned something since: It's not good enough in international relations to be right. You have to find ways to achieve what you are seeking. Since there's no international court available that can enforce what's right in every instance, one has to go the path of diplomacy, which means dealmaking. One should never lose sight of the values side of matters. But one has to go beyond that and think about how one can achieve what is right.
"It's something I find lacking in discourse here. It's very much about who's right — namely Ukraine, no question about it," the ambassador said. "That's where often the consideration stops, while countries
that are in the situation we are in — with the Normandy Format (Russia, Ukraine, Germany, France) — we have to think further and think about how to get to the point where what is right turns into reality. We cannot stop trying to figure that out."
That's why Putin's recent offer of a United Nations peacekeeping mission in Ukraine is a development. "We have to explore the chances and the dangers of this mission. That's the way we see it. If you straight away say 'it's a trap,' then you close an avenue where you don't know where it leads," Reichel said.
Reichel said that there is "no question that sanctions have helped" in pushing Russia towards peace. And that's why sanctions should remain. “I participated in the international coordination meetings to set up the sanctions," he said. "We are very intent to see international cohesion."
He said Germany remains "very frustrated with the course of the discussions we are having and, in particular, with Russia." Russia hasn't carried out the three major elements of the Minsk peace agreements: a cease-fire, withdrawal of troops and weapons and return of the eastern border to Ukraine's control.
Reichel doesn't believe that war is a reason for Ukraine to stall on domestic reforms. He has developed a list of changes that he believes Ukrainian politicians should make to satisfy the demands of Ukrainians and to strengthen the nation's democracy and economy.
Among them are reforms in the judiciary, elections, privatization, pensions, land, energy and corporate governance of state-owned enterprises. On Ukraine's historic resistance to creating a private agricultural land market, "Ukraine is missing a really important chance by hesitating," he said.
At the top of his list "is everything that is related to anti-corruption — judicial reform, of course, also an end to obstructions and difficulties for anti-corruption activists. I have a sense that in this area, reform is more difficult than in social and economic areas not directly related to anti-corruption."
On Ukraine's need to effectively fight corruption, Reichel said, the G7 group of leading industrial democracies — Japan, Germany, Italy, France, United Kingdom, Canada and the United States — are aligned.
"We have a lot of international cohesion in the way we think of reforms in Ukraine: an independent court structure which provides beside quality judicial service on anti-corruption measures and is not in danger of being influenced is crucially important. The sooner, the better."
While he's heard Poroshenko and Prime Minister Volodymyr Groysman express support for anti-corruption chambers within the existing court structure, Reichel said: “I still believe it is much better to have a specialized judicial structure which takes care of high-level corruption issues."
He sees resistance coming from "quite a few people in the Rada who are not interested in changing the way anti-corruption issues are being investigated." But he's impressed with new anti-corruption institutions, particularly the National Anti-Corruption Bureau of Ukraine, led by Artem Sytnyk, who seems fearless, he said. Sytnyk has also said that the agency has reached a dead end because Ukraine's courts are incapable of holding proper trials and delivering fair verdicts.
Germany and other EU nations are seen as threatening Ukraine's status as the major transporter of Russian natural gas to Europe. Ukraine's massive land-based pipelines are capable of moving 120 billion cubic meters per year, but are transporting far less today.
Ukraine's privileged position is being whittled away by Germansupported Nord Stream 1 and soon Nord Stream 2, two Baltic Sea pipelines connecting Russian supplies directly to Germany. Together, they will be capable of carrying 110 billion cubic meters of gas. The fear is that Russia will eventually bypass Ukraine's pipelines altogether, depriving the nation of at least $2 billion yearly in transit fees.
It's not Germany's fault, Reichel said.
"The Russian strategy to work around Ukraine has to do with the experience of the 2008–2009 gas crisis," when Russia shut off gas to Ukraine for three weeks in January in a dispute over debts and price.
"Russia doesn't want to be dependent on transit through Ukraine. It's not a controversial issue," Reichel insisted. "We are believers in the diversification of energy sources and transit routes. Those who froze in 2009 in Europe because the gas didn't arrive, they want to know if another dispute comes up, there are alternative routes by which the gas can reach them or alternative suppliers. We have no interest in killing the transit through Ukraine. We believe there should be transit through Ukraine and along other routes."
Germany is also criticized for running huge export surpluses, creating global trade imbalances. Critics want Germany to cut subsidies to powerful industries and increase wages to stimulate domestic demand. And, of course, Germany is not keeping its commitment to the 29-member NATO alliance to spend at least 2 percent of its GDP on defense.
Here again, the ambassador said, Germany is not to blame.
"The EU has integrated its trade policy," he said. U. S. President Donald J. Trump "may tell voters not to buy German cars, but they buy German cars. Are we to blame for this? Are we to make worse cars so that General Motors sells more?"
The shortcomings of Ukraine’s news media haven’t escaped Reichel’s attention. He told Ukraine’s Day newspaper in an article published on Sept. 7 that ”there is little journalism in Ukraine which I would trust completely.” Elaborating, he told the Kyiv Post: “The problem here is that the owner controls what the paper says. We (in Germany) have editorial independence as a rule.”
Reichel said that average Germans need to catch up with their government's recognition of Ukraine's history and its status as an independent nation.
"In government foreign policy, there's no question that everyone understands that Ukraine is a fully independent country and is treated as such," Reichel said. "People need to understand better in Germany and other European countries that Ukraine has its own history and that suffering from the Holocaust and (World War II) is a specific and very important part of Ukrainian history. There's a tendency in Germany to say 'what is to the east is Moscow.' Moscow has always been a major factor in the way Germans saw the world — the Cold War and everything. Now we have independent countries that emerged from the Soviet Union, not by coincidence, but because they have their separate identities. That is something people have to fully grasp."
German Ambassador to Ukraine Ernst Reichel speaks with the Kyiv Post on Sept. 25 in the German Embassy in Kyiv. (Kostyantyn Chernichkin)