The Ukrainian government led by Volodymyr Groysman has been implementing reforms in the country for nearly two months. Reforms are awaited by all Ukrainian people, but also by the West, whose support can mean a lot. The first European visit of prime minister Groysman was to Germany - the state which, in fact, is the key lobbyist for Kyiv’s interests in the EU.
The head of the Cabinet, Volodymyr Groysman, gave an interview to Ukrinform’s own Berlin correspondent, which touched upon such issues as how to develop trade and economic ties between the two countries, as well as urgent internal problems such as natural gas price hike for households, the non-appointment to date of a Minister of Health, on investments, on claims of the premier’s own "lack of independence." We began with the "most vital issues."
GOVERNMENT IS TO PROTECT THOSE WHOM IT SHOULD HELP
- Mr. Groysman, perhaps the top list of criticism voiced by the population includes the Cabinet of Ministers’ resolution to raise natural gas prices to UAH 6,879 per thousand cubic meters. The average price of Russian natural gas for Ukraine this year has been set by Gazprom at $177 dollars and Ukrainian gas costs even lower. All attempts to get the appropriate data on how this price is calculated have failed. Can you please explain how this price was calculated? And is it a fair one?
- This is a market price for natural gas. When we talk about the price of UAH 6,879, the price is calculated as follows: the price at the German hub, plus gas brokerage, then the price is set, plus transit costs, plus distribution overhead throughout Ukraine, ending up with the final price which includes taxes. And as of today it is UAH 6,879, which is 100 percent of its value.
Now, concerning Ukrainian natural gas. Ukrainian gas costs UAH 4,849 excluding VAT. This means that 50 percent of the price is the state’s rent. This payment is paid by a gas producer. This means that it has also its own market price. But the amount paid to the budget is also channeled for the needs of the state.
But most important is a subsidy system built in such a manner that the state assists a household that is unable to pay for it. Therefore, low-income households are fully covered. We are just witnessing the political card being played, the PR-populists’ card, who use it to scare all people. They have been using this scheme for two years, claiming the situation is a disaster, everything is going down the drain, and all actions are unfair. On the contrary, I believe we have removed corruption from gas pricing procedures. When there existed from two to four price brackets in Ukraine, those leaders who had been running all the processes, including those who had power [I do not want to mention them], they had been profiting from this situation all the time. Our government will never take advantage of the schemes to pocket money! We will do our best so that both the state and the public at large earn funds. Therefore, this decision is obviously the right one. The only thing they demand is political will and understanding from our public. Those who ought to be protected will be protected, but those who own palaces or large mansions they will have to foot the bill. And they will pay for it.
- You said that as the result of such pricing policy the number of subsidies will increase. But would it be a better policy to consider monetization of the benefits? Let households decide on their own whether to save on heating, make their homes more insulated from cold, or pay a high price to monopolists after raising their pensions and salaries? After all, at present we don’t have a civilized market for housing upkeep services, no competition, and we cannot choose – which companies and at what prices will supply our electricity, central heating or water.
- This market is at its infancy stage. And it is important that such mechanisms available, undoubtedly.
But what is the essence of a subsidy? This is a targeted financial assistance to those in need. We have been using a targeted approach for covering these costs of purchasing, for example, natural gas.
As for the issue of upgrading, we can use other tools too. And we were talking about them in Berlin. This includes establishing the Efficiency Fund. I think it will become operable from 2017. It will focus precisely on how to ensure energy efficiency.
Today, Ukraine consumes from three to four times more natural gas per one square meter than, for instance, Europe. This means that we will be able to pay after upgrading from two to four times less than what households pay now. This means that our first goal is to increase our energy efficiency. Our second task is to raise our people's incomes. And this is one of the chief priorities for us today. To overcome poverty is the most important task. But this will be possible only when the economy becomes a developed one. The transitional stage is, of course, subsidization. To protect the target groups, those households who are specifically targeted and should receive this assistance.
UKRAINE WILL BE AN INDEPENDENT STATE
- Mr. Groysman, you announced the launch of the Energy Efficiency Fund in early 2017 and voiced the goal of "turning government subsidies and investments into energy efficiency” on June 23 during the Ukrainian Forum on Energy Efficiency in Kyiv. In recent comments to Ukrinform German Environment Minister Barbara Hendricks said that the strategy of "transforming subsidies to investment" is an idea developed in her ministry which is ready to assist Ukraine progress along that path.
- We discussed this issue with the German side. Earlier, I had worked as Deputy Prime Minister in the first government after the Revolution of Dignity. It is difficult for me to say exactly who this initiative belonged to. But the definite fact is that it was an initiative because of our bilateral cooperation.
- Can other countries, in addition to Germany, join the process?
- Why not? We have a comprehensive program for modernization of the energy sector. We should put a lot of effort into this project.
- On the topic of energy. German Chancellor Merkel recently said that "North Stream-2" is a purely economic and not a political project. Do you believe in the promises made by the champions of the project that its implementation will not harm the interests of Ukraine?
- I believe that this project can pose a threat in terms of energy dependence of the European Union, including the monopolist supplier. The challenge we are facing today is diversification. And I think it is essential to make the most of Ukraine’s opportunities. We propose these and insist on using them [opportunities]. And I think there is a lot of sense in them.
Moreover, we are open. We are now reorganizing and restructuring the state-ownedNaftogaz enterprise now. The company already has an independent public advisory board. Decisions will be made in the next few days on the distribution functions of gas transit, gas storage, gas trading and gas production in order to do away with monopolists in Ukraine, which will be a very positive signal for reliability of the oil and gas industry operation.
Moreover, we are doing our best to increase the production of our own gas. We believe that on the one hand, energy efficiency and, on the other hand, domestic production will improve our capabilities related to power generation, including hydropower, which has huge development potential at present. It will all turn Ukraine into an energy-independent country that possesses a strong economy.
THE WORLD IS TIRED OF RUSSIA, AND NOT OF UKRAINE
- The question of [anti-Russian] sanctions is also becoming more and more a test of strength for the European Union. Some German politicians such as Vice Chancellor Siegmar Gabriel, Foreign Minister Frank-Walter Steinmeier have recently been promoting the idea of gradual lifting of sanctions and facilitating dialogue with Moscow. Rumor has it that the sanctions will be extended in full for the last time. Are we ready for such developments?
- You correctly said "we." We includes not only Ukraine. Is the civilized world ready to ease the pressure on the aggressor? Just answer the quetion. I'm not ready.
- And if West finally decides that it gains financially?
- Then the question arises: who's next? Who is the next victim of aggression?
All countries should understand this fact. The sanctions are a [mechanism] so that the aggressor would abandoned his plans. If he gives up the plans, his reward is the lifting of sanctions. If the aggressor continues to expand aggression and he gets rewarded for it, then the question is: who's next and what’s the location for a strike somewhere in the world?
When I hear that some countries are talking about reducing the sanctions against the aggressor, I always ask the question: would not easing of the sanctions be a reward for continued aggression? The sanctions were imposed on the aggressor as punishment for ignoring international law. And they can be lifted only if the aggressor begins to abide by the international law, territorial integrity and state borders of the sovereign states. And after that we can already say that sanctions are not an end in itself, but a mechanism.
- While visiting the U.S you demonstrated a map of the reforms that were supported by U.S. politicians. However, in speeches, interviews delivered by German politicians one can increasingly feel the "Ukrainian fatigue". Many of those who say that Kyiv is shielding the conflict in eastern Ukraine in order to justify indecision and slowness of reforms.
- And we will not make any excuses. The Russian aggression is a fact. But this is not a reason to say that there should be no change in the country. Let's talk specifically about the reforms that have been already concluded or to be implemented. And if any German citizen asks me a specific question: what has been done in a particular field, I’ll give him/her a very specific reply: that has already been accomplished, and which reforms have not been completed, where we are facing challenges.
And I’m talking quite honestly about these problems in my speeches. We are having challenges with corruption, challenges of the Russian aggression, horrible challenges of populism in our country. That we are fighting information warfare. That the world is getting tired, most likely, not because of Ukraine. Ukraine has brought no troubles, no suffering to anyone. And Russia, who is trying to maintain destabilization, has brought military aggression and killing Ukrainian citizens in the territory of the sovereign state in the 21st century in central Europe. That's all. So what kind of fatigue can it be?
You know, you cannot trade values. I always cite the words of the German pastor Niemoeller (Martin Friedrich Gustav Emil Niemoeller, 1892 - 1984, Protestant theologian, pastor of the Protestant Evangelical Church, one of the most prominent opponents of Nazism in Germany, president of the World Council of Churches - ed.), who said:
First they came for the Socialists, and I did not speak out—
Because I was not a Socialist.
Then they came for the Trade Unionists, and I did not speak out—
Because I was not a Trade Unionist.
Then they came for the Jews, and I did not speak out—
Because I was not a Jew.
Then they came for me—and there was no one left to speak for me.
We have a similar situation here. I visited the Museum of the Wall on Monday. It shows how the people from East and West Berlin fought for their rights. And there is an exposition dedicated to Ukraine! Pictures showing that you cannot kill innocent people! Where people wearing simple construction helmets are facing bullets! And this is a challenge. For the whole world.
AUTHORITIES MUST TREAT BUSINESSES WELL
- Let us talk about the economy now. The downtrend in the Ukrainian-German trade turnover has ended in the first quarter when it exceeded the total amount of 1.3 billion euros, or an increase of 19.23 percent. What are the Ukrainian government projections for this year as to bilateral trade with Germany? Can we say that the trade with Russia has been offset by sales in other markets?
- I think our reorientation to the markets of other countries on the whole will have a very positive impact on the national economy and the development of domestic technology. Russia has always tried to keep Ukraine as it raw materials base. That has reduced our competitiveness and made it impossible for us to develop. Now we see new markets, we can sell our finished goods, including raw materials and it leads us to the modernization of the Ukrainian economy. This is on the whole a very positive [trend].
We expect 1.5 percent rise in our GDP this year. And of course, we are interested in investments. We have much to do to improve our investment climate.
I want to say that all would understand it clearly: for us it is very important to have any successful investment project. If we have a successful investment it will result in successful Ukraine.
And the most important objective: the more diverse are investments, the sooner the country will change itself, its institutions and culture of doing business. Big businesses will reduce their market share, and small and medium enterprises will gain more of their share.
There I have only optimistic forecasts. We should implement reforms, deregulation, privatization in our country, complete judicial reform and reform of public finances, which is highly important. And thus we can proceed on the right path of development.
- Can you provide German investment amount in Ukraine? Is there any hope for investments to grow?
- More than $5.4 billion. We have about 4,500 enterprises operating in Ukraine with German capital.
In fact, Germany is taking a very important position in developing our economic potential today.
We are interested to see investments expand and businesses feel more comfortable. And we are ready to accomplish these goals.
I once said and I want to repeat it again: the government should facilitate the businesses to grow. Regardless if they are Ukrainian, German, American or Dutch ones. It is important that the businesses feel themselves comfortable. Our task is to make that happen. Do not put pressure on them and not to try to heavily regulate it, but to release it. When I was mayor, I succeeded in doing that. And now the same has to be the ideology of the state: not putting pressure on the businesses, but provide assistance.
The Office to support investments will soon be established. Under the auspices of the Prime Minister. I want this office to become a success.
THERE ARE NO CONSPIRACIES BY TOP GOVERNMENT OFFICIALS
- Let’s talk about another “old sore” topic. Health care reform has been stuck for several years. And now we have no minister even to implement it. When will the minister of health be appointed?
- We have acting Minister today. He faces an extremely hard task – reforming of the sector. A number of decisions have already been taken, deregulation of medicines, for example. We will make resolutions on reimbursement and differential pricing. We heard a very good expert’s solution on health care reform.
I think that the health care reform is not directly related to the presence or absence of a minister or acting ministers. It has more to do with what really matters. And what matters are the changes because the health care system is in a very critical condition.
- And finally the "tricky" question. As with previous prime minister, you have been accused that de-oligarchization is not being realized, some of your colleagues in the government meet with the oligarchs and they have veto power over your decision and that the "strategic seven" and the Poroshenko bloc party with the Popular Front party have a final say. How can you comment on that charge?
- Someone probably has wishful thinking.
The political life of our country is quite complex. It’s so. But this is an exaggeration concerning the "strategic eight" or "seven." Regarding some secret conspiracy and councils. It's all, frankly, is untrue.
The fact that the leaders of the country convene is true. The fact that they are communicating is true. The fact that we are discussing some issues of state development or challenges is also true. We have a war cabinet. There is NSDC (National Security and Defense Council of Ukraine) where the wider number of the state officials gathers.
No one has any right to veto anything. The right of veto has the President on legislation. Everything else is the ability of decision making and the ability to implement these decisions. That's all.
I joined the government to serve my country. And I will do so based on my own experience. My experience lasting for eight to nine years in the governing bodies testifies to the fact that if reforms are done rightly, then we can be successful. I want to conduct the reforms correctly so that eventually a Ukrainian citizen would realize that the government understands what the people seek, and it’s trying to change the situation for the better.
Nothing is too big to overcome. This is what we must do. And the time comes when every man for himself must make a decision: will he serve his country, will he change anything? Or he will continue to support some processes that can ruin the state? I do not want this! I want on every day that I work to make fair decisions in relation to people.
When I walking in my hometown, I am not hiding from the people there. Because I did not do anything wrong to them, I was always honest. Although I made plenty of unpopular resolutions. But they always understood me. And as a result of those decisions the public responded to them mostly positively.
The same applies to the upper government level. But of course, everything is more difficult here. It is much more difficult. A lot of populism, a lot of gossip, plenty of envy. The political elite have some grievances against each other. But I think that more people should rise who sincerely want to serve our country.
We gained independence twenty five years ago. Now we need to make our state a success. We will succeed in several years!
Olha Tanasiychuk, Berlin