Germany interested in Ukraine's continuing status as gas transit country – Ambassador Reichel (Part 2)
Exclusive interview with Extraordinary and Plenipotentiary Ambassador of the Federal Republic of Germany to Ukraine Ernst Reichel (Part 1)
Question 1: Ukrainian experts believe Germany and German companies are the main lobbyists of the Nord Stream 2 project in Europe, which Kyiv is emphatically opposed to. Do you agree with this statement? What is the official position of Berlin? Are German companies interested in participating in the management of the Ukrainian gas transportation system or working in a reformed Ukrainian gas market?
Nord Stream 2 is not a project of the German government, but of five private companies from four EU countries and Gazprom in total. Two of these private firms are German companies, three others - from other EU countries. The German government or other German state agencies are not directly involved in the project, let alone in the funding of it.
Whether the project is economically viable, this is primarily a question concerning the enterprises involved. They must answer it for themselves. Besides, it goes without saying, if the interested firms decide to finally implement it, Nord Stream 2 has to comply with all legal acts on this case, which are applied in the EU to all projects of such nature.
The German government is fully aware of Ukraine's concerns regarding the Nord Stream 2 project and the foreign policy context behind it. The German government will continue to stand for using the Ukrainian gas transportation system for providing gas to the EU member countries, for example, the countries of southeastern Europe.
With regard to the possible participation of German companies in the management of the Ukrainian gas transportation system, of course, there is a huge need for investment. The network is in poor condition. I believe it is too early to raise the question. Naftogaz has still not been disaggregated. The conditions under which the EU firms could participate in one of the separate successor companies of Ukrtransgaz are still unclear. Regarding the overall economic and investment climate in Ukraine, there is still room for improvement, for example, in reforming the activities of judicial bodies and the fight against corruption. But when we have a clearer vision in all these bulk of themes, I believe German companies will show interest in the activities of Ukraine. They, no doubt, have a fairly high level of expertise.
Question 2: How would you rate the pace of reforms in Ukraine? What are the difficulties the German investors face in Ukraine?
For two years and a half after the Revolution of Dignity, Ukraine has moved forward on a number of fundamental reforms: the reform of public procurement and the introduction of the tender system ProZorro, by the way, with the financial support from Germany; the creation of the new police force and new institutions on fighting corruption; the stabilization of the banking sector by Ukraine's central bank; elimination of the system of price subsidies in the energy sector that was particularly prone to corruption; important steps towards visa-free regime and implementation of the agreements within the framework of the IMF program, to name only a few achievements.
However, major changes have yet to take place, or they are taking place slowly: the privatization of state owned enterprises, the elimination of shortcomings in the establishment of a state governed by the rule of law, and, perhaps, the most important, a sustainable curb of endemic corruption, because, as you know, Ukraine occupies the last place in Europe in terms of the Index of corruption perception (Transparency International rating). Reforms are definitely going in the right direction, but often times too slowly and they are encountering a lot of resistance in their implementation, as it was the case with the recent introduction of e-declaration system. Therefore, you should not be surprised that, first of all, the lack of legal security and related endemic corruption are the factors that most strongly interfere with increasing activity of German investors.
Question 3: Are any contracts and investment projects expected to be announced at the planned October 11th Ukrainian-German business forum in Kyiv?
At this forum, which we will hold together, the focus will be on the representation of Ukraine as an attractive trading partner and investment destination. Hopefully, a lot of contacts will be established, through which it will be possible to make certain cooperation agreements.
Question 4: The creation of the German-Ukrainian Chamber of Commerce was announced in October last year. What is the reason for delaying its launch?
Creation of the German Chamber of Commerce is being held according to the schedule. And it is not correct to talk about delays as no specific date for the opening had ever been announced. The grand opening will take place on October 10. It is perfectly normal that some legal and administrative steps have to be taken before the opening of this chamber. I am convinced that, the Chamber will have a lasting positive effect for German-Ukrainian trade and investment relations.
Question 5: Germany provides substantial assistance to internally displaced persons from Donbas. What are the latest figures in terms of granted and nominal amount of allocated funds for the humanitarian block?
Germany renders an extensive assistance to Ukraine, which is a targeted combination of short-term emergency aid measures along with medium and long-term support. With regard to humanitarian assistance to Ukraine, Germany is ranked first among bilateral donors. This year we have significantly increased our humanitarian assistance up to EUR 22.4 million. Key measures of the German aid are aimed to assist internally displaced persons in the form of health care, water supply, sanitary equipment and food provision. The federal government has allocated EUR 3.5 million for the restoration of houses that have become uninhabitable because of hostilities.
But Germany doesn't only provide humanitarian assistance. Our support at the bilateral level amounted to nearly EUR 200 million last year. In addition, Germany is assisting Ukraine by allocating EUR 500 million under the untied financial loan, of which EUR 200 million have already been transferred to the State Deposits Guarantee Fund. The funds will benefit those Ukrainian citizens, who had savings in banks withdrawn from the market. The remaining EUR 300 million will enable Ukraine to invest in infrastructure and restoration.
We can draw a clear conclusion: Germany stands firmly by Ukraine's side, either in the sphere of civil society or in politics or the economy. We provide full support and expect at the same time that Ukraine will purposefully push forward its comprehensive program of reforms.
Question 6: Is Germany ready to support Energy Efficiency Foundation which is being created in Ukraine and provide soft loans for IDPs' housing? What amount of money can Kyiv count on?
Germany has played a significant role at the stage of formation and conceptual development of Energy Efficiency Foundation, which has been repeatedly publicly stated by Vice Prime Minister Zubko. Germany will also provide financial support to the Foundation, both in a direct way and through its share of the contribution from the EU side.
I have already mentioned the support at the bilateral level for the citizens affected by the conflict in eastern Ukraine.
Question 7: In July 2015 the Verkhovna Rada ratified the memorandum with Germany on a loan of EUR 500 million for the restoration of Donbas. According to the document, EUR 300 million from this sum were to be allotted to the energy sphere, infrastructure and utilities and EUR 200 million as macro-financial aid. As far as we know, neither of the projects from the first part of this loan has been approved yet. What is the reason of delay for the allocation of resources?
The above mentioned EUR 200 million have been allotted some time ago and contributed significantly to strengthening the State Deposits Guarantee Fund. In the context of about 80 banks vanishing from the Ukrainian market in the past two years and the need to refund deposits to many private deposit holders, this support was of significant economic and social importance for Ukraine.
As for the remaining EUR 300 million, selection and conception of activities that will be funded in the areas of the respective credits you mentioned, have progressed quite far. Binding agreements on such measures are achieved between the Government of Ukraine and the Federal Government of Germany within the framework of a working group especially established for this purpose.
It is true that we are moving forward not quite as fast as we would like. But it is also true that we are talking about projects of significant technical and administrative complexity and the Ukrainian side has to carry out some internal coordination before the final decisions can be taken. But I am sure that you will see the first specific, tangible results very soon.