DEPUTY SECRETARY REAFFIRMS U.S. COMMITMENT TO

C O N F I D E N T I A L SECTION 01 OF 03 KYIV 000758 SIPDIS E.O. 12958: DECL: 04/30/2019 TAGS: PREL PGOV EFIN EPET UP RS SUBJECT: DEPUTY SECRETARY REAFFIRMS U.S. COMMITMENT TO UKRAINE Classified By: Ambassador William Taylor for reasons 1.4(b,d). Summary -------------- ¶1. (C) Deputy Secretary Steinberg conveyed the message that the Obama Administration strongly supports Ukraine's independence and sovereignty in meetings April 26-27 with Rada Speaker Lytvyn, former Speaker and presidential contender Arseniy Yatsenyuk, opposition Party of Regions representatives, and other foreign and security policy leaders. (Meetings with President Yushchenko and PM Tymoshenko reported separately.) The Deputy Secretary also underlined the need for Ukraine's leaders to put political rivalries aside and take decisive action to address the ongoing economic crisis through the IMF program. Yatsenyuk argued that a generational shift in leadership was needed, and that he was prepared to lead this new generation. Regions representatives criticized Tymoshenko's handling of the economic crisis, arguing that either a broad coalition between Tymoshenko's BYuT and themselves or early Presidential and Parliamentary elections were solutions. Speaker Lytvyn stated that only transparent political dialogue that put the nation first could place Ukraine back on the right track. At a dinner April 26, the Deputy Secretary heard concerns about neo-imperial Russian policy toward Ukraine. End Summary. Deputy Secretary's Message -------------- ¶2. (C) During an April 26-27 visit to Kyiv, Deputy Secretary Steinberg stressed in meetings with Rada Speaker Volodymyr Lytvyn, presidential contender Arseniy Yatsenyuk and Party of Regions representatives that the Obama Administration remained committed to Ukraine's security and independence, and continued to support Ukraine's Euro-Atlantic aspirations. He noted he was in Kyiv to help set a course for continued US-Ukraine cooperation. The Deputy Secretary said that it was time to get past "politics as usual," and that Ukraine's leaders must work together to overcome the political and economic crises facing the country to lead Ukraine toward a prosperous and secure future. ¶3. (C) David Lipton, Special Assistant to the President for International Economic Affairs, stressed in the meetings that Ukraine could not wait to enact needed measures to shore up the economy, including budget reform and bank restructuring. He said that the hard realities facing Ukraine included �A;continued difficulty in the world economy, depressed external demand for Ukrainian exports, and capital markets reluctant to lend to Ukraine. Ukraine would have to solve its own problems, but would have the help of the IMF, he said. Lipton cautioned that bank recapitalization and other structural reforms had to be done openly and transparently if Ukrainians, and global markets, were to have confidence in the process. Yatsenyuk: Yes I Can -------------- ¶4. (C) 34-year-old former Rada Speaker and presidential contender Arseniy Yatsenyuk told the Deputy Secretary that the time had come for "huge changes" to the political system in Ukraine. He asserted that through his new political movement, "Front for Change," he would "create a new political elite" that could move beyond the "overpersonalized" politics that currently dominate Ukraine. He decried the political populism that hindered necessary economic reforms, and said that the country should improve the current constitution rather than start over with a new one. Yatsenyuk said he wanted to see Ukraine move to a parliamentary republic "within five to ten years," rather than return to a strong presidential system. He concluded that "everyone is exhausted right now," adding that consensus on some of these broad issues could be possible after the presidential election. ¶5. (C) When asked to comment on Ukraine's external relations, Yatsenyuk told the Deputy Secretary that "everything begins with the neighbors." He implicitly criticized Tymoshenko for the way she handled the March EU-Ukraine joint statement on gas transit modernization, which aggravated Moscow, saying that "it is far better to give the Bear treats, than to kick it." Yatsenyuk said Moscow had too much influence in the EU, particularly with Germany, France, and Italy and that the Russians also kept their influence in Ukraine by maintaining "hooks, or concealed relationships" with all Ukrainian politicians. KYIV 00000758 002 OF 003 ¶6. (C) Drawing on the Administration's "reset button" theme, Yatsenyuk proposed "reshaping" the most controversial issues in the Ukrainian-Russian bilateral relationship, namely NATO enlargement and Ukrainian nationalism. Yatsenyuk quietly commented that Ukraine would not, however, play second fiddle in any relationship between the US and Russia. Within two to three years, Yatsenyuk predicted, the US would realize that "Russia will always be Russia" and then progress between the US, Ukraine, and Russia would be possible. Lytvyn: Dialogue and Transparency are Key -------------- ¶7. (C) Speaker Lytvyn told the Deputy Secretary that Ukraine needed the support and cooperation of friends like the US, but added that "you (US) can only support those who want it," and who help themselves. Lytvyn said that it was important that Ukraine's political leaders unite and create a "culture of dialogue" to work for the common good of the country. He added that the ongoing political battle between Yushchenko and Tymoshenko prevented necessary reforms and hard decisions, such as the package of IMF-related legislation, to be taken. He argued against changing Ukraine's political system to "suit the personalities of certain political leaders," a reference to rumored negotiations towards a BYuT-Regions coalition and ongoing debates over constitutional reform. Ukraine needed "radical measures" to regain people's trust in political leaders, said Lytvyn, or else "we will have nothing." ¶8. (C) Turning to the economy, Lytvyn stressed that necessary economic reforms, including bank restructuring, had to be done openly and transparently. He characterized some politicians' recent declarations of political reform as attempts to draw attention away from the economic crisis and to "distribute power amongst themselves." Looking longer term, Lytvyn argued that Ukraine needed to reform its political system to introduce open party electoral lists, clearly delineate the powers of the president and prime minister, and have local administrations elected, not appointed. The country also must develop an independent energy strategy, he said, noting that the current system was lucrative for some business clans that continued to prevent meaningful change in the energy sector. Lytvyn concluded that the cooperation between Tymoshenko and Yushchenko on energy security at the EU conference in Brussels was a step in the right direction, but noted that Russia should play a role in the energy sector modernization and reform process. Regions: We Know What to Do -------------- ¶9. (C) Party of Regions deputy faction leader Serhiy Lyovochkin criticized Tymoshenko's handling of the economic crisis and said that most government Ministers were "unprofessional and incompetent." He told the Deputy Secretary that the government had done little to combat the economic crisis since the IMF released the first tranche of its Stand-By Arrangement. Lyovochkin criticized the constant political battles between Tymoshenko and Yushchenko, saying that they were more interested in scoring political points against one another than pushing through the reforms needed to fix the economy. ¶10. (C) Lyovochkin outlined two possible options to overcome the current economic crisis and political infighting. First, Regions could unite with Tymoshenko's BYuT faction to create a broad Rada coalition. The coalition could replace many of current Ministers with "professionals" and would have the votes in the Rada to pass necessary legislation. The second option would be to push for early Rada and Presidential elections. Lyovochkin said that Regions was confident it would prevail in both elections and that it would then be free to make the changes needed to restore economic stability to Ukraine. He said that there was a strong preference in Regions for the second option because it was more democratic and "normal." Russia -------------- ¶11. (C) At an April 26 dinner hosted by the Ambassador, the Deputy Secretary met with senior foreign policy and security officials and leading members of the Rada. A repeated theme was concern about neo-imperial Russian policy toward Ukraine. Kostantyn Gryshchenko, Deputy Secretary of the National Security and Defense Council and concurrently Ambassador to Russia, observed that the attitude in Moscow is that "the US KYIV 00000758 003 OF 003 needs Russia more than Russia needs the US." If the Obama Administration did not take concrete actions to show Russia that it could be firm, the situation could become "dangerous" for Ukraine. The Deputy Secretary underlined that the US sought better relations with Russia where possible, but not at the expense of other interests or commitments. As for concrete actions, he pointed to the Administration's resolve to continue to support the holding of NATO exercises in Georgia despite vociferous Russian opposition. ¶12. (C) Former Foreign Minister Borys Tarasyuk said he welcomed the re-start of US relations with Russia, "but not at the expense of Ukrainian interests." Better US relations with Russia are good for Ukraine, but the US should reiterate to Russia that it must not be "aggressive." Russia has demonstrated its aggressive tendencies not only in Georgia, but also in the gas disputes with Ukraine in 2006 and 2009. These represented "a serious challenge." He said that Ukraine had to start looking to Iran as a possible alternative source of gas, an issue "of great strategic importance." ¶13. (C) The Deputy Secretary noted the appointment of Ambassador Morningstar, known for his central role in promoting the Baku-Ceyhan pipeline, as evidence of the Administration's commitment to diversification of gas sources and pipeline routes. We would like to discuss with Iran a different future. Much would be possible if Iran would change its policy and end its nuclear enrichment program. However, if Iran gets a nuclear weapon, it would spark a nuclear arms race and put the region in peril. ¶14. (C) Valentyn Nalivaichenko, head of the Security Service of Ukraine, noted that Russian Services are "aggressive" in parts of Ukraine, particularly Crimea. The Russian Embassy is financing pro-Russian separatist groups. Ukraine is "nearly" ready to expel the Russian Consul General. Gryshchenko highlighted the distorted image of Ukraine in the state controlled Russian media - Ukraine is second only to the United States as "Great Satan." Yatsenyuk (also present at the dinner in addition to his private meeting) concluded that it was impossible to have mutually respectful relations with Russia. The best one could hope for is "predictable" relations. He did not perceive any significant difference between Putin and Medvedev: "the interdependence is so great, there is no way to split them." ¶15. (SBU) The Deputy Secretary cleared this message. TAYLOR