Foreign Affairs Committee on Feb. 16th, 2017

[Raj Saini, Liberal, Kitchener Centre, ON]

Thank you to both of you for coming here.

I have some questions for both of you, but after listening to your opening preamble I have more questions than I thought. Let's start with realpolitiks, because I think that both of you are practitioners, and you understand the reality on the ground. Let me start with you, ambassador.

Having travelled to Ukraine, I feel Crimea is effectively lost. Even if you look at Minsk I or Minsk II, there is no mention of Crimea.

I use the historic example of Kashmir, because in Kashmir you have a line of control that now has become the de facto border. If you look at Ukraine, at their line of control in the Donbass that is now temporarily holding, it seems to me that this area of the Donbass that has been taken over by Russia is now effectively being controlled by Russia. Aid has been given there. Structures have been set up because now Ukrainians don't have the ability to go there and set up simple things, whether a health care institution or an educational institution, so Russians are ultimately providing that service. So without firing a single shot, effectively they've taken over Ukraine.

As a counterweight to that, to me you raise a very interesting point that they could have gone into Tbilisi but they didn't. So effectively, if you look at the region, they've heightened the tension there and kept everybody on high alert, which you know is not sustainable. You can't keep up the spending on NATO where it's 2%, and going back to the professor's point, domestic politics plays a great role, but these countries can't sustain that kind of spending. They don't have the economy, and we were there.

Effectively, Russia's game is not necessarily to take over by firing shots. On top of that, there's the presence of the Russian media in those areas, because some of these countries still have a high ethnic Russian population, so if you look at Russia today and the other media—effectively in these countries that's the only media they have—not only do they have a military presence, but they also have a media presence. How are you going to resolve this going forward?

[Chris Westdal]

Reconciliation.... As I mentioned in my remarks, it was noteworthy that the separatists asked Moscow to annex the Donbass, and Putin said no, that he believes in the territorial integrity of Ukraine, minus Crimea. But there was a point there. Russia didn't get invaded, twice, massively, through the Black Sea and Crimea; it got invaded across the plains of Ukraine. Russia's security interest extends to all of Ukraine, not just the Donbass and Crimea. That's one factor.

The other factor is that the Ukrainians are adamant about territorial integrity. Now, that may or may not, in their minds, include Crimea—and in many of their minds it does—but even if it doesn't, the insistence on territorial integrity would mean that Kiev has to come to terms with those separatists, and that is going to have to involve a measure of devolution of power. As I was saying, we should be encouraging that devolution of power.

Ukraine may have to face a very difficult choice. It would have been much easier for Ukrainians if they had inherited a more purely Ukrainian ethnic state, but they didn't. They inherited a state that required Kiev to appeal across not only the Ukrainian ethnic group but the Russian ethnic group, which was, and remains, a very significant part of their population.

If there is to be territorial integrity, it's going to have to involve devolution. I don't think Vladimir Putin thinks that it's in Russia's interest to break up Ukraine, precisely for the reason I spoke of. Russia's security interest has always extended to all of Ukraine.

[Raj Saini, Liberal, Kitchener Centre, ON]

Professor, you raised something very interesting. You talked about Russia trying to seek markets, and you also mentioned the One Belt, One Road and central Asia. We know that the One Belt, One Road goes through three central Asian cities. You talked about rapprochement with Hungary, and I would say that even the Visegrad nations are now tilting in that direction. Let's talk about realpolitik and bring it down to the economic point.

The GDP of Russia right now is equivalent to that of New York. You talked about trade and partnering, and you talked about central Asia and other countries. But the trade and partnering they're doing is not with rich countries, not with stable countries. To some extent, these countries may not have the ability to pay for and buy Russian goods, whether it be oil or gas.

If we take a step back and go back 15 years, do you not believe that it was a miscalculation on Russia's part, because Russia feared NATO more than the insurgents of the European Union, that they didn't really think,“Well, okay, let these countries become part of the European Union. That's not important for us, the economic argument. The more important thing is the military argument”?

Now, as you mentioned, it's a revisionist history. Now they're going back and suggesting to hold on for a second. Now they're part of the European Union, and a lot of these Baltic states, from what I understand, are tilting their purchasing power and their economy towards Europe, whether it be electricity, natural gas, or oil. I don't know how Russia is going to survive, when the Baltics and other countries—the satellite states, or whatever you want to call them—are now titling their focus because either they are fearful and want to join the European Union, or they want to improve their own economies. How does Russia maintain that, when its own economy is not that stable?

[The Vice-Chair, Conservative, Dean Allison]

That's all the time, Mr. Saini, but if you have a response, Mr. Dutkiewicz, that would be great.

[Piotr Dutkiewicz]

I should start by saying that this year the Russian economy suffered a sharp decline, 3.7% of the GDP. That's a lot. This year, 2017, by western and Russian predictions, the Russian economy will be back to about 1% of economic growth. It's not much, but still, it's an improvement.

The Russian budget is based on $40 per barrel of oil. The oil is now hovering around $45, $46, up to $50. It means there will be some surplus. This is still mostly natural resource-based because about 60% of trade is in this area.

At the same time, with regard to agriculture, Russia is becoming one of the biggest exporters of grain. It competes with Canada very successfully in this area. Also, it will soon become the exporter of meat. It competes with Canada in this area.

I could continue. First, the Russian economy is not as bad as we believe it to be. Second, it's not compatible with other original economies, but still, the volume of trade will be sustainable for some time to come. Obviously, for Russia, it's important to import high-level technologies, and those come from Europe and also China.

This gives you a picture of the economy in certain trouble, but the trouble is not big enough to say that Russia is not the biggest partner in the region with China. They can simply divide the turf in such a way that it will accommodate both the Chinese and the Russian interests in the region, as far as the economic sphere is concerned. That's how they are working toward this.

The Eurasian Economic Union is the vehicle for this advancement of Russia into the region—not political advancement, but economic advancement. I feel that this partnership with China will stabilize, to a certain extent, the Russian economy. The Chinese are going to invest very heavily in Russia's and Siberia's natural resources and land.

Where does this leave Europe? Technologies. Russia needs European technologies, if they don't come from other sources, and to sell gas to Europe.

This is the answer to your question. It's a concern, but the bottom of the crisis of the Russian economy, to me and to other experts, has already passed, at the end of 2016.

[The Vice-Chair, Conservative, Dean Allison]

Thank you, Mr. Saini.

That's all the time we have.

I want to thank Mr. Dutkiewicz and Mr. Westdal for coming in and providing the other side of the argument. You've given us some interesting things to think about. There was some good dialogue today. Thank you very much.

We're going to suspend for a couple of minutes because we have to set up for a video conference for our next hour.

[The Vice-Chair, Conservative, Dean Allison]

If I could have all the members back at the table, we'll get started.

Sam, can you hear us? Someone wants to say hi to you very quickly.

[Dr. Samuel Charap, Senior Fellow for Russia and Eurasia, The International Institute for Strategic Studies - Washington, DC, As an Individual]

I can hear you.

[Prof. Piotr Dutkiewicz]

Sam, Piotr Dutkiewicz here.

Be a nice guy today.

[Dr. Samuel Charap]

I'll try my best.

[The Vice-Chair, Conservative, Dean Allison]

Welcome back.

Here we are in our second hour of discussion on the situation in eastern Europe and central Asia.

I want to welcome our two guests, who are joining us by video conference. Anders Aslund is a senior fellow with the Atlantic Council.

Welcome, sir. We're glad to have you here.

Also joining us is Samuel Charap, who is a senior fellow for Russia and Eurasia at the International Institute for Strategic Studies in Washington, DC.

He is joining us from New York today. Welcome.

Let's get started. We're going to have both gentlemen give us their testimonies. Then we'll go back and forth among the members for questions over the remaining 55 minutes.

I'm going to start with you, Mr. Charap. The floor is yours, sir.

[Samuel Charap]

I wanted to address one of the questions you put to us today, specifically the question about the way in which the relations between Russia and the west impact development in the region we're talking about. This is partly adapted from a recent book I co-authored with Timothy Colton of Harvard University called Everyone Loses: The Ukraine Crisis and the Ruinous Contest for Post-Soviet Eurasia. The concluding chapter of the book looks at the impact of the regional contest on all the countries we call the in-between countries, namely, Ukraine, Belarus, Moldova, Georgia, Armenia, and Azerbaijan. We argue in the book that across the region a similar dynamic is playing out. Neither the west nor Russia can prevail in their regional contest, but the contest itself is doing damage to the in-between countries.

Most directly, of course, that damage has come in the form of these conflicts, some of which are frozen, some of which are not. In the book we get into some of the ways in which the stepped-up contest between Russia and the west has hamstrung the transition from Communist rule and political and economic reform in these countries.

These states all suffer to varying degrees from a similar set of post-Soviet pathologies: dysfunctional institutions of modern governance, partially reformed economies that lack functioning markets, weak or absent rule of law, patronal politics based on personal connections and dependence rather than ideology or coherent programs, pervasive corruption, and a close link between political power and control of major financial and industrial assets.

Viewed in comparison with the post-Communist countries that joined the EU in 2004— Poland, the Czech Republic, Hungary, Slovakia, Estonia, Latvia, Lithuania, and Slovenia—which I'll refer to as the EU8, the in-between countries' disappointing performance since 1991 comes into vivid relief.

I've provided static measurements of governance in these six countries and a composite index of the eight countries that joined the EU in 2004. Across a range of indicators—voice and accountability, government effectiveness, rule of law, political stability, regulatory quality, control of corruption—the difference is pretty stark. This is borne out in Transparency International's corruption perception index.

Using Freedom House's political rights scores and civil liberties scores as well as the European Bank for Reconstruction and Development's competition policy scores, all of which have been kept since 1990, you can see the way in which the eight countries that joined the EU in 2004 took off and the six I'm referring to lagged behind. The gap begins quite small in the early 1990s and then grows dramatically over time.

Finally, a comparison of Poland—the other EU8 didn't keep statistics going back all the way to 1991—with the in-between countries in GDP per capita, using 2011 international dollars on the basis of purchasing power parity, reveals a stark contrast. In terms of GDP per capita, only Belarus, thanks to Russian subsidies, and oil-rich Azerbaijan are slightly better off than they were in the final years of the Soviet Union. Moldova and Ukraine are poorer today than they were when the transition began. When compared with Poland, Ukraine's underperformance is particularly striking. In GDP per capita, Ukraine has gone from a higher figure than Poland to a figure one third less.

Of course, many factors have contributed to this disparity between the EU8 and the six in-between countries I'm talking about. The contest between Russia and the west was not the only factor, but it did feed regional dysfunction in important ways.

First, it's helped to sustain what has been called a partial reform equilibrium in many of these countries. In other words, these are economies that concentrated gains among a small group of winners at a high cost to society as a whole. Those winners owed their wealth to distortions and rents spawned by partial reform, and they use their economic power to block further advances in reform that would correct the distortions upon which their wealth was based.

Russian and western willingness to subsidize political loyalty have contributed to this phenomenon. For example, Russia pours money into Belarus through waivers of oil export tariffs and below market gas prices. It was willing demonstrate similar largesse to Ukraine under Yanukovych.

The west has also played this game, often in breach of our own policy of linking assistance to meaningful reform. Ukraine's current IMF program is its 10th since independence. All previous ones have failed in the sense that the fund has suspended lending because Kiev did not implement the required reforms.

The notoriously corrupt Moldovan government would surely have gone bankrupt more than once without its EU lifeline. In another example, following the August war between Russia and Georgia in 2008, Washington committed $1 billion in assistance to Georgia, a country of fewer than five million people. These financial infusions, which have been clearly spurred on by the regional contest, make it much easier for governing elites to postpone structural reform indefinitely.

A second way in which the contest has contributed to the dysfunction is that it has exacerbated pre-existing political and ethnic cleavages in several of the in-between states. In Ukraine, the confrontation has mapped onto and intensified internal divisions over identity. Although those divisions were much starker before the war, and the balance has shifted somewhat since then, regional schisms regarding membership in NATO and the EU, for example, still remain. The same is true in Moldova, although in a different way. Transnistria residents, for example, as survey research has consistently revealed, would prefer to become part of Russia than to reunify with Moldova. Even on the government-controlled territory on the right bank of the Dniester River, Moldovans are divided. As of October, 2015, 45% favour joining the Eurasian Economic Union over 38% who favour the European Union.

Caught up in the contest between Russia and the west, weakened social cohesion sharpens these these ethnic and political divides, which have of course dented fragile democratic institutions. The same to a certain extent is true in Georgia as well.

The regional contest that permeates these countries has also warped party politics and in some cases supplanted democratic discourse with demagoguery. In Moldova and Ukraine, for example, parties and leaders have declared themselves pro-western to capitalize on the popular desire for good government, which many people associate with the west, but, when in power, they have all too often proven to be just as corrupt and incompetent as their so-called pro-Russian opponents.

Additionally, the contest for influence between Russia and the west has hobbled western efforts to support reform in the region. This is partly a function of practicalities, as I discovered when I was in government. When these kinds of geopolitical issues are at the top of the agenda, other problems like reform or democracy sort of fall by the wayside. At times when the contest is particularly intense, there have been examples when policy-makers have deliberately downplayed human rights and democracy-related problems for fear of pushing these countries into Russia's embrace. One example is the EU backpedalling on conditionality with Yanukovych in the run-up to the Vilnius summit of the Eastern Partnership in November 2013.

Since the Ukraine crisis, this problem has actually become more acute. The bargaining power of some of these states has sort of increased vis-à-vis the west, but their compliance with the rules and norms that have been promoted by the west has not meaningfully changed and, in some cases, even decreased.

Belarus is a case in point. In February, 2016, the EU rolled back sanctions on President Lukashenko and his inner circle as well as several state-controlled firms. EU officials have admitted that in doing so they ignored Minsk's non-compliance with Brussels' requirements regarding human rights on the reasoning that Belarus had become “a battleground of powers”.

The U.S. also joined this effort in re-establishing defence links with Belarus in March 2016. This might be justified on the merits, but it does sap the ability to push regional governments to reform, because when you soft-pedal criticism of rulers who are, for the moment, pledging fealty, it feeds a widespread belief in the region that public censure regarding human rights, democracy, or reform is merely an instrument to punish disloyalty. When western governments are inconsistent in airing those kinds of critiques across countries or over time in particular countries, it undercuts those officials who do speak out about abuses or push their interlocutors to reform.

It's easier for regional leads to brush off such concerns if they receive mixed messages or can point to double standards. By treating these countries as spoils to be won, we give sometimes the regions' elites a foil against almost any expression of disapproval: the threat of turning to Moscow. In the case of Ukraine post-2014, where that threat is no longer credible, western states have been reluctant to withhold public statements of support and financial assistance on the logic that the country cannot be allowed to fail.

So, basically, in trying to prevail over each other, we have a situation in which neither Russia nor the west is succeeding in that contest between them, and the battle itself is causing a lot of collateral damage that has set back these countries that find themselves stuck in between.

I'll leave it there. Thank you very much.

[The Vice-Chair, Conservative, Dean Allison]

Thank you very much, Mr. Charap.

We're going to move over to Mr. Aslund now.

We'll have your opening statement and then we'll go right to questions.

[Anders Aslund, Senior Fellow, Atlantic Council, As an Individual]

Mr. Chairman, members of the standing committee, thank you for inviting me to talk to you today about this very important topic. I will focus on your questions as they have been posed. I will focus on Russia's intentions, and also on what we can see so far from the Trump administration.

The key thing about Russia's foreign policy today is that Russia has a strong sense of domestic insecurity. Russia has become an authoritarian state. Its authoritarianism is not very severe, as counted in the number of political prisoners, but it's quite efficient in terms of a very strong surveillance of citizens that is just about unprecedented.

President Vladimir Putin maintains a personal authoritarian rule. In his first two terms, he based his legitimacy on political stability and fast economic growth. Since 2008, however, Russia's economy has stagnated. With the fall in the price of oil, Russia's GDP has fallen, in U.S. dollar terms, from $2.1 trillion to currently $1.2 trillion. That is, Russia's economy today, in current U.S. dollars, is the 14th biggest economy in the world. At the same time, exports and imports from 2013 to 2016 approximately halved.

The Russian economy is not very big. The striking thing is what President Putin talks about when it comes to the economy—stability, not growth. He counts stability as having large reserves, a small budget deficit, minimal public debt, a large current account surplus, low inflation, and low unemployment. These are the measures he's concerned about. That the standard of living, counted as retail trade or real income, in the last two years has fallen by 15% does not concern him at all. It's stability that is important, not economic growth. Therefore, in its foreign policy, Russia does not have any strong economic objectives, which is rather difficult to understand for people coming from democracies and market economies.

Instead, President Putin has turned to an old Russian strategy to gain legitimacy, through “small, victorious wars”. The term comes from 1904, before the Russo-Japanese War. We've seen in the last decade Russia's war with Georgia in 2008, five days, small and victorious; the annexation of Crimea in 2014, a small and victorious war that was approved by 88% of Russians; and the war in Syria, which has also been small and so far victorious. The problem was the war in eastern Ukraine, which was neither small nor victorious.

What we should expect from this perspective is that President Putin will “poke” more instability in the region. The question is not if he will do it but where and when he will find an opportunity for what he considers to be a small and victorious war. This means it's mainly the countries in his region that are in trouble. He favours destabilization, as we can see in the unresolved military conflicts in Moldova, Georgia, between Armenia and Azerbaijan, and now in Ukraine. We are to expect more such minor wars. The two countries in case right now are actually his closest allies, Belarus and Kazakhstan.

As my late old friend Boris Nemtsov, who was murdered two years ago, used to say, Putin respects article 5 in the NATO statutes. The NATO countries have so far not been touched and it's vital that situation continue.

How would I describe Russia's main priorities and interest in eastern Europe and central Asia? They can be described in three terms: political dominoes, domestic political control through authoritarian rulers, and corruption. Again here there are no particular national economic goals involved. Russia's main export is oil. The oil is quite unpolitical. Gas is a much less important export, and that is highly political and involves a lot of corruption.

In what way do broader relations between Russia and the west impact development in these regions? Russia wants to separate and isolate countries in the region from the west. Russia's interests are not primarily economic but are focused on geopolitical dominance, promoting corrupt and authoritarian regimes.

Turning back to Trump's administration, what are we to expect about its policy towards countries in the region? So far, the Trump administration has said extremely little about it. The main statements have come in the last few days. On February 14, President Trump's press spokesman, Sean Spicer, stated, “President Trump has made it very clear that he expects the Russian government to de-escalate violence in the Ukraine and return Crimea. At the same time, he fully expects to and wants to get along with Russia”, unlike previous administrations.

This was followed by a tweet by the president, “Crimea was taken by Russia during the Obama administration. Was Obama too soft on Russia?” This is of course in reaction to all the criticism. President Trump has criticized virtually all significant countries in the world, but there's not been a negative word about Russia or President Putin before. He has just about mentioned Ukraine on a couple of occasions.

What are the implications of this for Canada? I think that for Canada it's an interest in standing up for the common western values in the region, and for standing up for multilateral organizations. That amounts to standing up for NATO, to maintain NATO as such, and given that the threat from the Arctic is increasing, Canada has all the greater interest in strengthening NATO whereas the U.S. attitude towards NATO is uncertain. The second point is that the European Union stands for the same human values and democratic values that Canada stands for. It's important for Canada to get closer to the European Union. CETA is an excellent step in this direction.

Finally, when it comes to western values such as human rights and democracy, Canada has all the great reasons to engage with or support other countries that share these values, and of course the European Union stands out as the main region that shares those values. From what Samuel Charap said here before, of course Ukraine is the tipping point. There's no country in the world that is at the same time so corrupt and so open and transparent as Ukraine. This is not a stable situation.

Either Ukraine becomes a western democracy and maintains its openness and defeats corruption, or it goes the way of most of those Soviet countries, into a mixture of authoritarianism and corruption. Corruption is no accident. It is a choice of authoritarian leaders who prefer to enrich themselves at the cost of their population. I think that leads to a massive focus on Ukraine.

Thank you.

[The Vice-Chair, Conservative, Dean Allison]

Thank you, Mr. Aslund.

We're going to start with the opposition.

Mr. Kmiec.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Thanks to both of you for appearing before the committee.

I'll start with you, Mr. Charap. You talked about the stalemate of “post-Soviet pathologies”. I want to ask you some questions about what you mean by the stalemate.

We're studying these last 25 years after the Cold War in eastern Europe and central Asia, and I feel that sometimes we lose focus, in that there's a deep history that goes far beyond the last 25 years. There are historical grievances and economic ties, but also some historical ties between countries, and a certain affinity that some populations have towards either being recognized as more western.... I have a bias here. I'm Polish. I was born in Poland. My family fled here in 1985, so I obviously have a bias, but the Poland I remember is a footnote in history. Many people who come to Canada from that area of eastern Europe don't identify the same way that I do in what I believe is the historical context of today.

Can you talk more about these stalemates? What do you mean by stalemates and these post-Soviet pathologies? I have a pathology, obviously, and it is more, I'll say, anti-Soviet Union, but it has a deep influence on what's going on today, so I want to know more about which countries you are speaking of and what systems. Are they economic, social, or cultural? Are these organizations that were created right after the Soviet Union's collapse that were meant to integrate economies better into the west and are not working today? Could you expand on that?

[Samuel Charap]

It's a shame that the chart's not in front of you. I was making a comparison between what we call in the book the six “in-between” countries—Ukraine, Belarus, Moldova, Georgia, Armenia, and Azerbaijan, those six states, or what the EU calls the “Eastern Partnership” countries—on the one hand, and on the other hand, the eight countries, including Poland, that joined the EU in 2004. The divergence in terms of reform, democracy, and quality of economic governance is extreme between these two groups. Poland is in a separate category in my analysis, because of its relative reform success in the post-Communist period.

What I meant by the “post-Soviet pathologies” that affect the six is that there's a similar pattern of governance failures, reform setbacks, and democratic deficits that is present throughout those six countries to varying degrees. In the chart, you'll see that it's not all uniform, but that there are a number of commonalities and common problems among those six countries. Your question is really about why they suffer from them.

A lot of it does have to do with the fact that they were fully integrated into the Soviet system for 75 years and emerged from it in much worse shape in terms of social capital and the potential for democratic transformation than a country such as Poland, but there is a range of reasons. The argument I was trying to make is that one of the reasons that these pathologies have continued in those six countries is that there is this stalemate between external actors, namely Russia and the west, in trying to compete for influence in these countries, and that neither Russia nor the west can prevail over the other, but the contest between them is feeding into these pre-existing pathologies and, in some cases, making them worse.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

My next question is for Mr. Aslund.

I want to talk about this bargaining power. For the past 25 years, a lot of these states, their politicians, and the civic institutions—civic society—have been bargaining between and pitting the west or Europe versus Russia: which country should they be more aligned with and who can give them the better deal? It's a very broad concept. We've seen that Moldova and Bulgaria have elected pro-Russian governments that are more interested now in seeing their future align with Russia, more so than with Europe, or with the United States, or with Canada, for that matter.

We've talked about this fear of states falling into the orbit of Russia. Does that mean inevitably that we have to continue being subject to this bargaining of politicians for domestic reasons, for their own local politics, or is there a way out of it for countries such as Canada?

I should also state that Canada is not a peer to Russia, and I know that previous witnesses who've appeared before this committee seemed to indicate that Canada is almost like a peer country. Economically speaking, we're far more successful than they are, but militarily and in terms of influence, far less. What is it that Canada can do in order to not be used, to not be abused with this bargaining chip, so that our money, our time, our effort, and our diplomatic resources will not be used for those domestic political purposes?

[Anders Aslund]

To begin with, I think that all the EU countries, including Bulgaria and Romania, are safe. In fact, according to Transparency International, Bulgaria and Romania are not more corrupt than the old EU countries of Greece and Italy. So we should not really worry about Bulgaria. It's more about what is down in the Balkans, but we can leave that aside for now.

In the former Soviet Union, I think that it's a clear division, but Armenia and Belarus are so far fully in the Russian sphere. Azerbaijan is massively authoritarian and there's very little any outside power can do there until we see a serious regime collapse. That leaves us with three countries that are of interest: Georgia, Ukraine, and Moldova. I would say that they will all go the way that Ukraine goes. Ukraine is the pivotal country for many reasons. I mention here that it has the greatest contrast. It is an open society with extraordinary transparency, far greater transparency than the United States has, for example. It is really at the level of Nordic countries, and at the same time, it's massively corrupt. There's a big fight going on against corruption; and the forces against corruption are civil society, part of the parliament, and the western powers.

Canada is greatly involved in Ukraine and plays a very positive role. Thanks to the open debate in Ukraine, there is a big consensus among civil society and western donors; and all the western donors have the same view. The issue in Ukraine is not socialism versus liberalism, it is corruption versus reform. The Ukrainians stand up for reform, and in order to get reform turning around in the right direction, we need to have a sufficient amount of money so that Ukraine can really move forward. At the end of 2013, the public debt of Ukraine in terms of U.S. dollars was $73 billion. Right now it is $71 billion. Ukraine has had far too little money from the west while they have carried out very big economic reforms.

I don't see this really as a bargaining process with governments against the west, although there is such an element also. As I see it, is the west there when there is real reform happening? That has been the case now in Ukraine for three years. The question is, will western aid to Ukraine be sufficient so that the good forces inside Ukraine can win.

[The Vice-Chair, Conservative, Dean Allison]

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

We're now going to move over to Mr. Sidhu.

[Jati Sidhu, Liberal, Mission—Matsqui—Fraser Canyon, BC]

Thank you for your testimony this morning. It's really interesting.

Since the landscape has changed in America, there's a new statement almost every day from Mr. Trump's administration. Russia is flexing its muscles into eastern Europe, and Mr. Trump's administration is saying that they need to work closely with Mr. Putin. There's the way his personality is. The Trump administration is showing some sort of interest in using Russia to combat ISIS in that area. What's your take on that? The way I see it, Mr. Putin is very smart, very cunning, very powerful. With the impression of combatting ISIS, maybe he wants to go into neighbouring countries to have his influence, because he wants to keep his natural resources very close and accessible, marketable, to the neighbouring countries.

What's your take on that? Either one or both of you can take the question.

[Anders Aslund]

My response is that the kind of financial links Mr. Trump has with Russia are a really big question. We know at least 10 major dubious people from the former Soviet Union have bought apartments in Trump Towers in Miami Beach or in New York. This has all been publicized.

President Trump has not published anything about his personal or company finances. There's a major question about what financial links there are between the Trump organization and the Russian economic interests. On the face of it, it does not make any sense that Russia would help against ISIS.

It's very striking that President Trump did not refer to democracy, human rights, liberty, the Constitution, or Congress in his inaugural speech. These were among the many words that were missing that are normally present in an inaugural speech. It's a question of what values the current White House stands for, where the senior adviser, Stephen Bannon, stands out with a rather curious list of values. In the authorities' view all the links between Russian intelligence and the Trump campaign have also been extensively publicized.

The Senate intelligence committee is clearly going to carry out an investigation. I talked to an aide to the Senate intelligence committee last night, and he said that the Republican senators were incensed that the White House had not informed them about this information coming from the intelligence agencies.

We are just at the beginning of this, and your question is very much to the point. As I suggested, we can only see there are lines in this.

[Jati Sidhu, Liberal, Mission—Matsqui—Fraser Canyon, BC]

What's your take on the question, Dr. Charap?

[Samuel Charap]

We don't really know what the new administration's policy is on anything so far. It's important to emphasize that. Not only do we not have clear statements of policy, but we don't even have key personnel in positions who would be able to either formulate or implement it. That is a little unusual a month into a new presidency, but nonetheless it is a fact.

I think if you look at some of the statements that were made during the campaign by Trump and some of the more ideological people around him, such as Bannon, as Anders mentioned, you get this sense of the world that is dominated by two major threats. One is China, from an economic perspective, somehow. The merits of that assessment are beside the point. I'm just giving my observations about what they seem to think. The other is what they call “radical Islamist/Iran”, the merits of which and the nomenclature are beside the point. I'm just saying what I think they think.

I think if you look at the world in those kinds of terms, and you don't have a particular background dealing with Russia, you think that Russia might be helpful on both of these issues. I think when you look at the details it gets far more complicated, as Anders suggested. I don't expect them to have a reverse Kissinger, where somehow we're aligning with Russia against China because I don't think Russia would go for that.

I do think they came into office with this initial intent to improve relations to see if Russia could be useful for them on their two big priorities in the world, particularly on the second one, on counterterrorism, as it used to be called.

I think you've already seen that the events, particularly of the last 48 hours, and the political pressure they have generated, affect their ability and interest in pursuing that initial intention of improving the relationship. If you look at the press secretary's statements made a couple of days ago where suddenly—Trump has always been tough on Russia—we immediately demand the return of Crimea, I think that's more by way of damage control, but suggests that there's already been a course correction at least because of the politics surrounding this issue, which is very intense right now in the U.S.

[The Vice-Chair, Conservative, Dean Allison]

Thank you very much.

We're going to move over to Madame Laverdière for her round.