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09.02.2015

Slava Rabinovich: Ukraine carries the heavy burden of “moronism”

The renowned financier and investment banker talks about what can save the Ukrainian economy

– How can Ukraine be raised from the depths that it has sunk to at present?

– I have been a portfolio investor in Ukraine for 19 years. And I think that in Ukraine, as in Russia, a breakdown has taken place. Unlike Russia, which once moved at great speed along the path of reforms, Ukraine lagged behind considerably. We had a chance during the Orange Revolution and Yushchenko. But Ukraine missed it and fell into the same neo-feudalism that Putin is building in Russia.

A year ago, an essentially bourgeois revolution took place, a revolution of the middle class. But now it is slowly crawling towards another coup, which threatens to be as ineffective as the events of ten years ago, but with its own specific nature and against the background of the war.

The new government and the president do not take half-measures, or even “quarter measures”. I visited Ukraine for the first time recently on 26 October, if I remember rightly. It was a Sunday, the day of elections to the Supreme Rada. At that moment, Ukraine received all the branches of power, legitimate and democratically elected. For the first time in many years, the Ukrainian people gave a nationwide mandate to both branches of power, both the president and parliament. But this mandate of confidence is not endless.

With this support from the people, the government has no reason to drag out the process of reforming the country, despite the fact that many of these reforms may seem painful and have elements of shock therapy, which Ukraine has never carried out to the end. Nevertheless, these reforms would provide a very swift positive effect. In a year it would be hard to recognize Ukraine, as the climate for investment and business would improve significantly.

Everyone would start working properly if reforms were carried out to revive medium and small business. All the powerful economies of the world rely on this. The last 30-40 years of history show that capitalism all over the world has brought hundreds of millions of people out of poverty. This was in part thanks to small and medium business, something which would have been impossible under socialism and communism.

This is what can and should take place in Ukraine. But we need to start with several necessary conditions.

The first of them is a purge of the ranks of power. The law on purges that was passed in Ukraine is far from perfect. I don’t understand why the political will was lacking to make the law normal. A successful process of purging has been carried out over the last few decades in many countries, from West Germany after the Second World War to a large number of Eastern European countries after the collapse of the Soviet Union.

I don’t understand why Ukraine can’t take a ready example and put it into practice from its western neighbor, Poland, which it is close to on the level of ties and mentality. The entire collective experience of purging could be used, by just “copying and pasting”.

At the same time, I can give you an example of how people were purged who should not have been, and people were left alone who should have been removed.

The border troops of Ukraine were historically under the jurisdiction of the KGB. Not because they all studied at the higher school of the KGB, like Putin, not because they all served there, but because they were part of this structure. When the law on purges was passed in Ukraine, all the border troops were dismissed. But if it you look at a powerful machine of oppression such as the Stasi (the Ministry of State Security in East Germany), and how purges were carried out there, you’ll see that even after the fall of the regime in the 1990s many people from the Stasi were not purged. There were highly qualified engineers and specialists in the organization who could not be replaced. And only people who were connected to political investigation were purged. There were not any excesses in this process. It’s not clear why Ukraine had to dismiss all the border troops, and who they are now going to recruit in their place.

At the same time, the law on purges, in many ways thanks to the rather foolish advice of the European Union, did not involve the purging of people who take part in democratic elections. The EU’s argument was that free and honest elections in themselves are a powerful filter, and that banning certain candidates from taking part in elections is undemocratic. Unfortunately, a grass-roots purge of this kind does not work in Ukraine, and people came to power in some cities and to the Supreme Rada who had no business in the new Ukraine. Corrupt officials and people who slow down the development of reforms continue to be elected.

In general, reforms and a new economic program are nowhere to be seen. I have asked this question on Facebook several times. Normal people, not mindless patriots, say in their comments that my ideas are correct, but that so far nothing is really changing. The others say that I shouldn’t give advice to Ukraine, but should stay in Russia and give advice there.

I think that Ukraine is held back by the terrible incompetence of the people who run the country. But that won’t be so bad if these politicians hire competent people, and give them political protection.

Do you know what I’d do if I were appointed finance minister of Ukraine or Russia? On the first day in office I’d fly to New York and meet with Hank Paulson, Larry Summers and Ben Bernanke. I’d fall on my knees before them and beg them to come to work in Kiev or Moscow as an expert council, without which I couldn’t work as the finance minister. Because one person cannot cope with the level of problems that these countries currently face. An entire team of highly-qualified specialists is required.

I welcomed the appointment of Aivarus Abromavicius as economy minster, I’ve known him for many years, but his appointment is a drop in the ocean. A huge number of completely incompetent people are employed in the state management of Ukraine, who should be dismissed and replaced with a small number of very competent people. Ukraine has the resources to do this, many ethnic Ukrainians have graduated from Harvard or Cambridge and have excellent qualifications and successful careers. You could pick the best of them and attempt to bring them to Ukraine to work for the good of the country.

Talks are currently underway with one of these people. I know him personally, and what’s more I’ve mentioned him in my speeches, but I can’t name him at the moment. He’s an ideal option for Ukraine, and talks are already at an advanced stage. President Poroshenko is in the process of giving him citizenship, and if everything goes ahead, then this person will move from a western country to Kiev as a member of the Ukrainian government.

– How can the western world help Ukraine in the war against Russia, besides providing loans and highly-qualified specialists?

– I believe that Ukraine fell victim not only to Russia, but to betrayal by the West. In 1995, the Budapest memorandum was signed. The Budapest memorandum was signed by four parties, including the USA and the UK, which are members of NATO, unlike Ukraine.

Now we have a situation when on the one hand NATO doesn’t want to fight Russia, but on the other hand it has violated the Budapest memorandum. Of course, not in the same way that Russia did. But it is not clear how and with what they have guaranteed the territorial integrity of Ukraine. So the signatures were not worth anything.

But Ukraine itself also carries the heavy burden of “moronism” in this situation. There is no one in Ukraine who could lobby the interests of this country in the proper place. And this shouldn’t be done in Brussels or the EU, but in Washington. If Ukraine secures 100% support from the USA on certain issues, then the European Union will agree with this. Firstly, Ukraine must convince someone in the White House, and then the White House, on behalf of Ukraine, will call Brussels and London and reach an agreement. Unfortunately, there is no one in Ukraine who could hold talks on equal terms in Washington.

Russia works much more effectively in this sphere. It has its own sophisticated old KGB rats like Fradkov, who were connected with the Main Intelligence Directorate. They know how the Western World is structure, and how to manipulate it. They understand what political lobbying is and they make use of this tool. Perhaps they are sometimes clumsy, but at any rate they do a much better job than Ukraine.

Yatsenyuk visits the West and says that the Ukrainians and unhappy and being mistreated. In fact, a person should go there who has been bending nails with his teeth for the last 30 years in New York or Washington. This person would meet the right people at the proper restaurants, and then the negotiation process would be finalized on Capitol Hill.

It is possible to find such people, and this should have been done a long time ago.

– What about Soros who regularly visits us, what is his role?

– Soros is a very elderly man. He has many different goals, and the first of them is charity, including promoting democracy in the world with his philosophy of open society. He’s been doing this for decades, and in many ways he’s right, but in many ways he’s not right. For example, a few decades ago Soros said that gangster privatization, dishonest and unfair, would divide Russian society so drastically that nothing good would come of it. And that’s what actually happened.

Additionally, Soros is a big international investor. He is interested in making money. He visits us to see whether it’s worth his while to buy up Ukrainian debts at default prices.

When I mentioned the person who is about to appointed in Ukraine, everyone started saying that it would be Soros. I found this amusing, how could it be Soros? He’s almost 90 years old… Of course, anything is possible, but there are other people out there who are much younger.

– Let’s move to the Jewish topic. In many Jewish organizations, Jews of the former USSR are collectively known as “Russian-speaking Jewry”. Although recent events show that the communities of our countries are starting to come into conflict. How can normal relations be preserved between Russian and Ukrainian Jewry?

– That’s a difficult question. I believe that the Jewish community of Russia has taken an utterly shameful and treacherous position. I can partially understand it, but I can’t justify it. The Jewish community does not have an official position, but it is approximately the following: we can’t help in any way, so we won’t do anything in order not to worsen the situation of Russian Jews in Russia.

When an entire group of Hasidim get together and go to meet Putin, and he tells them that Goebbels was a talented person in a certain context, and doesn’t get any criticism from them – this looks revolting.

Of course, when we recall the situation of the Jews in Germany and other European countries in the late 1930s, the question arises as to how Jewish communities in Russia can support what is essentially a fascist regime. We risk becoming next in line, that is obvious.

– So we Ukrainian Jews should “understand and forgive” our Russian brothers, so to speak, because they have no choice?

– Everything in the world takes place in cycles. In answering this question, we may look at the situation of Jewish communities in Europe before WWII, how these communities behaved, and whether they collaborated with fascist regimes. And how these communities sorted things out among themselves after the war.

The dictator Franco in Spain was a fascist and an ally of Hitler. But he saved the Jewish community of Spain from extermination, he forbid the fuehrer from wiping out the Jews in his country. The fact that the Jewish communities of Spain did not speak out against Franco does mean that they supported the regime, Hitler or the extermination of the Jews. So this issue cannot be treated in black-and-white terms.

I am not a specialist on Jewish history, on the history of postwar Jewry, but this topic really is very interesting to study.

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