Am­bas­sador Ernst Re­ichel senses busi­ness op­ti­mism

Kyiv Post - - Business - BY BRIAN BON­NER BON­NER@KYIVPOST.COM

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.

Ger­man elec­tion

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.

Kyiv’s fears

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.

Cor­rup­tion 're­sis­tance'

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.

En­ergy, econ­omy

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?"

Me­dia woes

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.”

Ukrainian iden­tity

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)

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