Foreign Affairs Committee on Feb. 26th, 2014

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I just have a couple of questions.

I'm wondering if you can talk a little bit about how serious the concerns are that have been expressed over some of the challenges to the territorial integrity of Ukraine. I'd also like to talk a bit about the relationship Ukraine has with NATO and with the EU, present relationships with them, as well. Perhaps you could give us a little bit of information on that.

First of all, can you deal a bit with the territorial integrity? Our government has come out and said plainly that we insist the unity of the country and its territorial integrity be maintained. Could you talk a little bit about that?

[Matthew Levin]

Certainly our position as a government has been to insist that it's fundamentally important that all parties, all partners of Ukraine, all neighbours of Ukraine, respect and support the territorial integrity of Ukraine. Certainly, any notion there might be of reopening borders would be extremely problematic and detrimental to the stability of Ukraine...possibility to seize this moment to really reinforce its democracy and build prosperity.

We have taken note that the foreign minister of Russia yesterday in a public statement also reaffirmed Russia's commitment to Ukraine's territorial integrity. We, certainly all our close partners in the European Union, Washington, have stressed and underscored that point. We believe that is a broadly shared perspective in the international community, and we'll continue to insist on it. We'll monitor developments. But we believe that is the path that developments are on.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I'd like to talk a little bit about the EU and its relationship with Ukraine. I think they were perhaps caught by surprise as well when Yanukovych made his decision in late fall. Can you talk a bit about the relationship there and where you see that going over the next short while, in the short and medium term?

[Matthew Levin]

The European Union, not to speak on their behalf, but they have said really throughout, following the Vilnius summit at the end of November where the Yanukovych government made clear its decision not to sign the association agreement that had been negotiated, continued to take the position that that door remained open despite that decision. During the most intense days of the crisis and throughout the last couple of days, as we've moved towards the formation of a new government, they have reconfirmed the position that they're very ready to resume that discussion and to proceed towards the signing of an association agreement.

With respect to the Ukrainian position, we have seen senior political figures—it's early to talk about them as ministers, because this was before anybody was appointed—including the acting president, declare Ukraine's interest in resuming that discussion and moving towards the restoration of that agreement very quickly.

I think the association agreement and the deep and comprehensive free trade agreement that were part of the EU-Ukraine package remain a very real and near-term possibility for completion. That being said, that is a negotiation that will take place between the European Union and the Ukraine. We can't really speak authoritatively with respect to that.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Quickly, having seen the makeup of the new government, do you think that's a group that will be open to those discussions?

[Matthew Levin]

I've seen the formation of the new government, at least those individuals who have been nominated as prime minister, foreign minister. The nominee for foreign minister, throughout his 20-year career in Ukraine academia and politics, has been a strong advocate of European integration for Ukraine. The other senior figures are themselves individually associated with a political movement that has supported Ukraine's Euro-Atlantic identity. So I would expect there would be a strong push on the part of the new authorities to proceed in that direction.

[The Chair, Conservative, Dean Allison]

Thank you. That's all the time we have.

I want to thank our witnesses for being here. We appreciate your taking the time to give us this briefing on Ukraine.

We're going to give you a chance to back away from the table. We'll get our new witnesses up here so we can start right at 4:30 sharp.

Thank you very much.

[The Chair, Conservative, Dean Allison]

I want to welcome our two guests who are back here again. It's great to see both of you.

We have from the Canada-Ukraine Chamber of Commerce, Zenon Potoczny. Welcome, and thank you for being here.

From the Ukrainian Canadian Congress we have Taras Zalusky who is the executive director of the National Office. Welcome.

I realize you both have opening statements. I want to start with you, sir. We'll have your opening statement, and then, Taras, we'll have yours. Then we'll go around the room and ask questions. We're probably going to finish right at a quarter after. Thank you.

[Zenon Potoczny, President, Canada-Ukraine Chamber of Commerce]

Thank you, Mr. Chair, for inviting us here to speak today.

I'd like to say a few words about the Canada-Ukraine Chamber of Commerce so you know where we're coming from.

The chamber is a privately led initiative whose purpose is to facilitate trade and investment relations between Ukraine and Canada by organizing and sponsoring trade missions, seminars, and trade conferences, in addition to offering access to specific areas of business expertise and consulting resources to the business communities both in Canada and Ukraine.

I would like to mention to Mr. Goldring that the Ukrainian shale gas reserves are about third in Europe, at about 42 trillion cubic feet, which is quite substantial. Companies like Chevron, Exxon, and Shell are working on production trading agreements right now, which is like mortgaging the resources to do things.

I would like to talk today more or less about the economic and financial requirements of provinces in Ukraine.

First of all, I draw your attention to the terms of the accession of Ukraine to the Treaty on the Non-Proliferation of Nuclear Weapons as a non-nuclear state. As you know, it was signed in December 1994 in Budapest by President Clinton, President Yeltsin, and Prime Minister Major. By that agreement the important thing is that these three countries have all guaranteed Ukraine economic freedom and not mixing in Ukrainian economic affairs.

Now as you see and probably heard a few days ago, Russia has again blocked the export of pork from Ukraine to Russia. Before, many other exports were blocked. Obviously Canada needs to remind all three of them, Russia, the U.S.A., and the U.K., what they have signed, and what guarantees they have given to Ukraine. I wish Canada would really press that issue.

Russia is also a member of the WTO now and needs to live by its obligations. Canada again needs to take a strong stand on this issue. The Russians cannot just do whatever they wish in Ukraine.

Second, essentially Ukraine now has pressed the reset button and is beginning the very difficult task of restructuring its government and government agencies. As an attempt to streamline these bodies to fit western norms, Canada can play a pivotal role in providing guidance. This guidance can take the form of sending consultants and advisers to work with the ministries and various government agencies to reform the policy and develop new policies. Hands-on commitment from Canada is needed here.

One of the reasons Yushchenko's government failed after the Orange Revolution was that they really had no advisers and no consultants helping them along the way. Let's not forget Ukraine has been under the Soviet system for many years, and unfortunately does not have as many specialists in these areas as we might think.

Third, we need a plan of financial support, something maybe of the nature of the Marshall plan is definitely required for Ukraine. We need an immediate intervention of western partners such as the EU, the U.S., Canada, and the International Monetary Fund.

Ukraine has been basically raped by the former regime of Mr. Yanukovych, and it's bankrupt. The economy is collapsing, and the currency is in free fall. For example, today it closed at 10.5 hryvnias to a dollar. Two weeks ago it was roughly at eight hryvnias to the dollar.

The incoming government estimates that Ukraine will require about $30 billion to $35 billion in financial aid, and certainly this assistance needs to be tied to clear and agreed reforms. The Ukrainian economy needs to be modernized to become competitive. This aid will also assist Ukraine in surviving the continuous Russian blockade and economic retaliation, especially in the energy sector.

Canada needs to be an ambassador and a visible financial participant in this plan.

Ukraine has about $2 billion in external bonds coming in, in the next couple of years. I believe half of it is to be paid to the IMF. The IMF needs to restructure this debt as soon as possible.

On the support for an economic strategy, in an effort to strengthen the Ukrainian economy, we ask the Canadian government to consider establishing a think tank or advisory board to advise the Ukrainian government going forward on necessary economic reforms. We have organizations such as CIDA active in Ukraine, but we feel that CIDA might need to move also into other areas besides the civic areas. It needs to move into areas of small and medium business development. This will help develop the middle class in Ukraine which right now is almost non-existent. You have oligarchs and you have a lot of poor people.

We have talked to CIDA. We have talked with them now for about a year or a year and a half and there was supposed to be a call for proposals to develop this kind of program for small and medium business development, but so far it has not been done. I think it's time to do it now and as quickly as possible.

The Canada-Ukraine Chamber of Commerce could be involved. We have over 110 business specialists as members of our organization. One-third of them do business now in Canada and in Ukraine, so they know both sides of the picture and they could be quite helpful in developing this program jointly with CIDA.

Last but not least, ladies and gentlemen, I have walked on the Euromaidan quite a few times. I have been to the barricades, and I have seen these people. They were ready and as you know a lot of them died for a free and democratic Ukraine.

Let's not allow Russia to buy Ukraine again for $15 billion as they almost did and suppress all of these people of goodwill that are fighting for freedom.

Thank you very much.

[The Chair, Conservative, Dean Allison]

Thank you very much.

We'll now turn it over to Mr. Zalusky.

[Taras Zalusky, Executive Director, National Office, Ukrainian Canadian Congress]

Thank you, Chairman.

The Ukrainian people have paid an extraordinary price for their freedom. They paid a price in human lives in favour of their own inalienable rights. It is the responsibility of the new authorities to ensure that they justify that confidence the people in Maidan entrust in them.

The Ukrainian Canadian Congress urges the new authorities of Ukraine to consult with civil society leadership as they move forward. We underline that in the coming days, weeks and months, we will see the historic course of Ukraine be determined. The establishment of a new government is only the beginning of the process of building a democratic and free country and much difficult work and many challenges lie ahead.

The Ukrainian Canadian Congress and the Ukrainian Canadian community stand ready to provide support to the people of Ukraine at this critical juncture in their history.

I understand that the previous speakers have given us a lot of background, so I'd like to be quite concrete here in some of the things I have to say. I have about 12 recommendations on what can be done to help build Ukraine.

The first one is I believe there is a need to create a government that will be inclusive and acceptable to the vast majority of Ukrainians, which responds to Mr. Goldring's point earlier and to others. There will be a need to immediately stabilize the political unrest in Crimea. There will be a need to normalize the relations with Russia. Ukraine does $30 billion a year of trade with Russia, and $40 billion a year with the EU, and it's not an either/or. Frankly, the fact that the Kremlin would close its door on Ukrainian exports when Ukraine indicated that it wanted to sign a deal with the EU is equivalent to the Americans stopping all the goods being exported at our border when the Prime Minister signed the trade agreement with the EU. It makes no sense.

We believe that the tax system in Ukraine needs to be reformed. There needs to be some progressivity in the tax system. Right now, the largest source of direct financial investment in Ukraine is Cyprus, a tax haven that people use to funnel money and siphon money from the state and from their own enterprises to avoid the payment of taxes. In 2012, the last year for which I have statistics, it's in the order of magnitude of $40 billion.

The new authorities will need to find the funds to ensure that the public sector can continue to be paid. We're talking about nurses, doctors, teachers, military, armed forces, and the police. That's good operating practice. One, it's important for providing peace, order and good government as we like to say here in Canada, but it's also very important in terms of putting an end to the endemic corruption we've seen where you can't get health care unless you pay a bribe, and the traffic police will stop you and they'll let you go if you pay a bribe. This is definitely an area that needs to be targeted.

Ukraine needs to deal with corruption. It's widespread and we need to assist them in dealing with it quickly and strategically. The priority areas for that would be the judiciary and the oligarchs, but also the top-to-bottom approach where no one is outside of the scope of the law.

On land reform, Ukraine still has a moratorium on the purchase of agricultural land, and they have to deal very carefully with how that situation is dealt with in the future. It's looked at by many as a possible source of revenue.

Mr. Yanukovych, on a trip in the third week of December, made a deal with the Chinese to lease out long term 5% of the best black earth soil in the world for a very long period of time. That's what we have to avoid, that they're actually mortgaging their future for immediate economic gain.

On privatization, there should be no rush to privatize. The last time this was done, there were many corrupt deals. Especially now in a period of financial pressure, there could be a tendency to not receive the best value for strategic assets.

We believe there needs to be a concrete path for not only signing the association agreement but also long term for Ukraine's EU accession once it has strengthened its agricultural and industrial sectors. There also needs to be a period of national reconciliation. It's very difficult, and we've all seen the images on the streets in the last number of days and months. Ukrainians will need to band together to build on this national project.

Finally, on technical assistance, we've spoken with the transitional authorities in Ukraine. They've indicated to us that the needs are great. The senior ranks of the public service in Ukraine were stacked with cronies and people who were not fit to hold the jobs that they were entrusted. People in the economic departments do not know what they are doing. They really do need help in a number of areas. Some of the areas I would suggest where Canada could provide some very significant assistance would be in things like developing sound fiscal monetary policy, agrarian reform, training of senior civil servants, police training. Today they have disbanded the Berkut, the SWAT police, and put in place a police force that has the values and ethics the people deserve and that is there to actually represent and protect the people.

Finally, in the long term what can Canada do? I would agree with what my colleague Mr. Potoczny has said on the point of an international assistance package. Other things would be the signing of a Canada-Ukraine free trade agreement, because I think trade is one of the best guarantors of a better future for our two countries; a liberalization of our visa regime between our countries; and to continue in the short term to provide humanitarian and much-needed medical assistance.

Thank you.

[The Chair, Conservative, Dean Allison]

Thank you very much, Mr. Zalusky.

We are going to start with Mr. Atamanenko, for seven minutes.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Gentlemen, thank you so much for being here and for providing your comments and sharing your knowledge.

I should say, Mr. Potoczny, that your representative in Alberta, Vitaliy Milentyev, is my cousin, and he has been keeping me informed of what's going on. I just wanted to thank him for that.

We all understand what's going on. I just learned, for example, that Russian MPs have been sent to Crimea and are talking to TV channels about expedited Russian citizenship, and this type of interference.

Russia is not going to go away. Should Canada be playing a role as a middle power to somehow bring Russia into the fold with the EU so that we can create, once and for all, a free and democratic country, but with support and without posing a threat to Russia at the same time? In other words, involve them and the EU, in everybody's best interests, to have, once and for all, as I said, this free and democratic country that is able to function with the European Union and still maintain ties with an economic partner such as Russia. If that's the case, should we be making more of an effort as a country to try to bring this together?

We don't want this to turn into a geopolitical battle or a battleground between the west and Russia. We can't have that. It's a question that has been on my mind in the last few days and I'm glad I'm here so I can ask you that.

[Zenon Potoczny]

I would say that negotiating with all the parties to the problem is always a good solution.

I'm just not sure if Russia is ready to negotiate, because, as you said, Russia is not going away. I'm glad that people like the Russian ambassador to Canada yesterday on TV said, “This is not even on our minds, entering into Ukraine.” At the same time, as you said, MPs from the Russian Duma are going there to sort of give passports to Ukrainians. This goes back to the Georgian play as they did over there. Suddenly it's, “We have a whole bunch of Russian citizens so we have to protect them,” or “We came in only to protect them.”

Yes, if you can somehow convince them, but I'm not sure that they are convincible. I would be very careful how you negotiate with them. If Canada can somehow be that ambassador and bring the three sides, including the European Union, together, I would be definitely for it.

I would just keep on telling everybody, that includes the U.S. and Russia, that they have signed an agreement; they have put their signatures on it, so stick to it. Don't play games, just stick to the agreement you have signed.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

Thank you very much for two very interesting presentations.

I was hoping to listen to you and to ask you about what kind of assistance Canada could provide and what was the economic situation over there. I think you've covered quite a lot of ground. If there is anything that's been left out of your presentation because of time constraints, please don't hesitate to take this opportunity to add to what you've mentioned.

I was struck by this issue of land grabs that we see happening more and more everywhere around the world, which is not limited to African countries. It's an important issue, so I just wanted to underline that I've taken note of that.

I'm finally coming to my question, which is about energy and energy sources. What is the outlook? What are the scenarios here for Ukraine?

[Zenon Potoczny]

Definitely, Ukraine has huge potential in energy. Ukraine has, as I said, the third largest reserves of shale gas in Europe. Ukraine has huge potential of regular natural gas in the Black Sea and Azov Sea. The problem always was, and I hope it goes away now, that they've talked about the potential but never have done anything about it, for 20 years. I go to these conferences on energy in Ukraine every year and the ministers talk about the potential, for 20 years now, but nobody has done anything. The main reason is all the ministers, including President Yanukovych, always wanted a piece of the action in every project that was going to be developed, and if they did not get what they wanted, nothing happened.

Even now when Shell, Chevron, and Exxon have signed production-sharing agreements with Ukraine, if you look very carefully at who is in these production-sharing agreements, it's usually the Ukrainian government on one side, the oil company on the other side, and then you always find a small company in between, which is there for 5%, 7%, 8%. These are actually companies related directly to Yanukovych and his family and friends. This is the main reason nothing has been done: they are always negotiating, "I need 10%, I need 15%, I need whatever per cent to let go.”

I hope that now, finally, this new incoming government will take very seriously that part of Ukrainian business, because really, if Ukraine develops the resources they have, they're free from Russia for the major problem they have, which is energy. Then actually Russia will be dependent on Ukraine because they still have to ship their product through Ukraine. At this point, unfortunately, when you buy 70% of your energy supplies from one country, and it is Russia, as you have seen before, they can turn off that tap, especially when it happens for some reason in the winter, and then you have no choice but to do whatever they ask you to do.

I would say this is the main reason, corruption, and basically not allowing companies to work freely on developing these resources.

[The Chair, Conservative, Dean Allison]

Thank you very much.

We're going to move over to Ms. Brown, and then to Ms. Grewal, for seven minutes.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

I'm going to give it to Mr. Anderson just for a moment.

[The Chair, Conservative, Dean Allison]

I was close, but all right.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you, gentlemen, for coming here today.

I have one quick question. I want to talk to you about the impact of the travel bans and potential sanctions.

What we have said as a government is that we're going to calibrate them to respond to the degree to which that intent and the spirit of that agreement are kept. Can you talk a little bit about whether you think they have worked? Did they get the attention of the people whose attention they should have had?

[Taras Zalusky]

I think you are dealing with two issues. One is the threat of the sanctions to make bad actors in the previous government stop doing the wrong things: stop killing people on the streets and stop the violations of human rights. For that intention, they have served their purpose.

The other reason you would put into place economic sanctions is to be able to subsequently recover the plundered assets. There was an article today by Andreas Umland stating that the Yanukovych family alone probably would be a potential source of recovery to the tune of $12 billion in assets. So, from our point of view, this is not the time to stop the economic sanctions. To the extent that those assets can be frozen and then be retrieved and returned to the Ukrainian people, it is absolutely necessary that it happen, given their current financial situation.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I'll turn it over to Lois.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

I want to take a moment, if I may, because I'm concerned about some of the things that were highlighted just a few moments ago in testimony.

I think it's important for the committee and for Canadians who may be watching this to know that Canada has been very involved with Ukraine for quite a number of years. They are a country of focus for us with our development dollars. I just want to highlight some of the projects that we have ongoing in Ukraine right now.

Saskatchewan Institute of Applied Science and Technology is working there with micro, small, and medium-size enterprises. The project is designed to benefit 14,000 students over its course. A lot of that money is being dedicated to helping women grow businesses.

I also want to highlight a project by Mennonite Economic Development Associates, a project that is aiming to strengthen the capacity of 5,000 smallholder farms in the regions of the Crimea and Zaporizhzhia.

Another project they have is for 6,887 small horticultural farmers, to help them improve their technical expertise.

Another project they have is with 3,000 dairy farmers in two districts of Ukraine, to improve the quantity and quality of the milk they produce.

In another one, they have 3,234 dairy farmers now introducing new feeding and pasture management techniques, milk storage and processing best practices, and other technologies to help them grow their businesses.

I would hate to have Canadians think that we have not been active. I have many projects that I could read into the record, but I just want to ensure that Canadians know that we have not abandoned Ukraine by any stretch of the imagination. Those projects are ongoing, and we look forward to the time when we can be putting other projects into Ukraine with the partners with whom we work.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

Thank you to the witnesses for their time and their presentations.

Viktor Yanukovych, now the former president of Ukraine, seems to have disappeared, and former government leaders can provide rallying points for counter-resistance and foment unrest.

At the same time, many countries can try former leaders for crimes committed while they were in office.

What leads does the Ukraine have on Mr. Yanukovych's location, and what legal options might it pursue against him?

[Taras Zalusky]

There is a nationwide warrant for Mr. Yanukovych's arrest. He has tried to exit the country on two occasions and has been stopped by the customs and border authorities.

As recently as today, a dossier has been prepared to be sent to the International Criminal Court concerning both Mr. Yanukovych and former minister of the interior Mr. Zakharchenko for crimes against humanity.