Tape 1 Касета 1
(00:01:00) It is May 9, 1996, and we are at the Media Labs at the Massachusetts Institute of Technology with George Soros. Mr. Soros. Can you describe your background and interest in the former Soviet Union.
Well, it has to do with open society and the open society foundation network. I went to Moscow in (01:01:00) the beginning of 87 to see if I could set up a foundation on the model of the Hungarian foundation. I was prompted by the release of Sakharov and the fact that he was allowed back to Moscow, rather than expelled. I did in fact set up a foundation called Cultural Initiative in 87, and then I met Bohdan Havrylyshyn at a conference in Germany, a Club of Rome conference, and my conversations with him (01:02:00) prompted me to think about setting up a foundation in Ukraine. This was in, I think, the Spring of ’89 that I first went to Kiev.
When you went to Kiev, who did you meet with?
The trip had been prepared mainly by H avrylyshyn. There were people waiting for me as potential members of the board. The key figure (whose name I now forget) head of the Ukrainian Cultural Foundation, (01:03:00) a Communist Party official who was going to give a legal base for the foundation there. The formula that we used in Moscow was to go into partnership with the newly-established Cultural Foundation of the Soviet Union, patron Raisa Gorbachev. There was a parallel of that in Ukraine. Olynik …
I think that was the man involved. He was going to be the official base. Then there were some more or less independent intellectuals … (01:04:00) a couple of filmmakers…oh, there was another event which was even more significant. That was a visit from Zuba, the writer, to the foundation in New York, and he asked me to set up a foundation in Ukraine. This was actually more important.
We had a rather interesting conversation where I told him about my rather negative feelings for Ukraine, because jews had been deported from Hungary to Ukraine, and were (01:05:00) mistreated by the local population. I had as a young boy a boxing instructor, a Hungarian jew who was deported to Ukraine, and came back. He managed to make his way back to Hungary, then became my boxing instructor at the age of 13 or 14, 1943-44, before the Germans occupied Hungary in March of 44. So he told me about his adventures, particularly how they were treated when they got off the bus that had taken them there. So that was by first-hand, second-hand memory of Ukraine. I told him about it, (01:06:00) and he said, “well, you should have a foundation so that this kind of thing will never happen again in Ukraine.”
That, I thought, was quite a powerful argument. Then when I got to know Havrylyshyn, I felt I had a man whom I could have confidence in, who could have local contacts and who could help set up the foundation. I then proceeded to do it. He had arranged the visit, and the people whom I met.
What kind of people did you meet with, beyond Olynik? (01:07:00)
The biggest differentiation was between Soviet people and real people. My insight into the nuances waas not big enough; I could distinguish between people who were part of the system and people who were aware of a reality apart from the system. Olynik was someone that one had to deal with, but not to be trusted, whereas the filmmaker was a real person. But I did not gain any deep insight into the intrincacies. The occasion of my visit, I think, … Pavlychko had his 60th birthday, so that was a big event. I went to that meeting, and of course Pavlychko was a Ukrainian nationalist hero, and it was a very moving occasion. It was a matter of concern to me, to what extent the people who were opposed to the regime were Ukrainan nationalists and to what extent were they believers in an open society.
What was your conclusion?
I relied on Havrylyshyn’s judgement, (01:09:00) because he knew it better, but I felt that most of the people who were going to be part of the foundation were basically open society people, but they were also very much came from a nationalist background, including Havrylyshyn. So there were shades of which point of view predominated, whether it was Ukraine come what may, or what kind of Ukraine. That was clear.
You must have had quite a bit of exposure to Rukh, and the nationalist wing. (01:10:00)
I met a number of them, and I thought they were a pretty difficult bunch, actually.
They have been pretty roundly criticized for allowing some of their internal squabblings to deter their main objectivee, which was building an open society, an independent Ukraine.
It was not clear that that was their main objective. Let’s say people like Zuba were very (01:11:00) committed. “Chernovyl”, who I only met once or twice, was a man of great moral stature, but quite inflexible in many ways, I thought. Pavlychko had very rudimentary ideas about open society. I didn’t think he was particularly deeply-grounded in democracy … he was much more language, and history, and so on … (01:12:00) Clearly they were much more concerned with independence at any price than with building institutions of democracy.
How did that effect the goals of your foundation when it was established? To what extent did you look at other players, beyond Rukh, who were determining how Ukraine would be shaped?
It is too general a question to give you an intelligent answer. (01:13:00) I was looking for people in the foundation who would be working towards it, and I was never really deeply personally involved in the political issues. So to the extent that I had good advisors, I saw things through their eyes. Not speaking the language, and not being firmly grounded, I really was relying on the people who were in the foundation. I think that on balance, we did get the right people from the beginning. It was OK, but not perfect. (01:14:00)
What are some of the thing the foundation did?
The initial task of the foundation was to provide support to civil society, non-governmental initiatives, particularly in the cultural field. Educational. So it was a grant-giving organization. It didn’t really have a program of its own. The program was to help people who are there, (01:15:00) who have independent ideas and want to build society, and to empower them. So it was a grant-giving operation. The main role of the board was to examine and to pass on grants, and the main job of the staff was to receive and prepare them.
In that respect it was like any other foundations, like the one in Moscow, or the Baltic states, that we set up. Then came a point (01:16:00) when Ukraine became independent, because the foundation was set up before Ukraine became independent. When Ukraine became independent, I had been very involved with the Shatalin program. There was a meeting here in Boston, Cambridge, with the Ukrainian delegation. That was when Pylypchuk and people like that turned up here. That was in 1990, no? Where already they would not have accepted a Shatalin plan had (01:17:00) Gorbachev actually endorsed it.
We then had, on that occasion or shortly thereafter, I had a meeting with Havrylyshyn in Washington in the hotel room, where we decided to activate the foundation in a somewhat different way. To develop it as a vehicle for delivering outside assistance to the newly-formed state. Here was a state formed without the building blocks of a state, and (01:18:00) hardly recognized in the west, neglected in the west, obviously in need of assistance for it to survive and to flourish as an independent state. Let us effectively use the foundation as a vehicle for delivering foreign aid. Set up the prototype, the infrastructure in the hope of attracting foreign aid, providing a mechanism for delivering foreign aid. Obviously, my means are limited.
That was a new phase, and it was a somewhat unique formulation. We did not do this in any of the other foundations. That is when we decided to set up a council of advisors (01:19:00) to the Rada, and tried to bring economists and provide technical assistance on planning, on economic issues, on constitutional issues, try to give lawmakers and politicians a chance to travel abroad. That became the new program. Not to the exclusion of the original program, but as an additional dimension. That’s when the Council of Advisors was set up and [John] Hewko got involved.
Those institutions played key roles…(01:20:00)
I think that they did. What came out of this was a series of institutions that were supported by the foundation. Those are institutions that would normally be purely locally supported either by the government or by society. They created a network of institutions, semi-autonomous in the sense that each had its own governance, staff, but they got their funding from me. Some through the foundation, and others through Havrylyshyn and the Open Society Fund outside Ukraine. There was, for instance, a legal foundation that was based on a blueprint prepared by Halyna Freeland, which was I thought very comprehensive project for setting up legal structure. The head of the board, [Serhiy] Holovatiy, did not want to take money from or be subordinated to the Renaissance foundation, so it had to be funded from the outside. That became the source of untold bureaucratic difficulties. But I accepted the fact that he did not want to be in a dependent position. There I definitely sensed that he had a different political orientation than the foundation itself. (01:22:00)
In what way?
That I don’t know. I just know there was clearly a difference. Probably Holovatiy was more opposed to the Kravchuk regime than the foundation. Havrylyshyn himself wanted to be on the right side of Kravchuk. He was eager to make friends, and saw the world in rose colored spectacles. To many people in Rukh and the nationalist camp, Kravchuk was a very desirable president. We had some disagreement on this subject. (01:23:00) I found him much less appealing. He did appeal to the nationalist sentiment in Ukraine. I think, for instance, that Holovatiy was much more critical. That’s probably the answer.
What are your impressions of Kravchuk?
I took a rather dim view of Kravchuk. There is always a little bit of tension as to who was opposed to the Soviet system, to the Soviet Union, and for what. I formulated communism as a universal closed system. (01:24:00) Those who oppose it because it is universal are nationalists. Those who oppose it because it is closed are democrats. So there is a spectrum, and very few of the people, I felt, in Ukraine were true democrats. I must say I took a fairly dismal view of the intellectual state of Ukraine. I felt it was a very depleted country, with very few intellectual resources. Very few good people. I considered Kravchuk and opportunist of the first order, quite unscrupulous. In my mind I compared him to Milosovich, in the sense that he was willing to play the nationalist card (01:25:00) in order to maintain himself, or establish himself in power. And he did try it, in Crimea, and so on. But he didn’t succeed because the economy collapsed. But he was a would-be nationalist dictator, if you like, creating a new closed society on that basis. Having failed, he changed horses. He’d been the ideologist of the Communist Party. Ideology was dead, so he got off the old horse and got a new horse, nationalism. I think a lot of these well-meaning nationalists were taken in by Kravchuk. (01:26:00)
Then when the economy collapsed, of course, it was a game that hadn’t succeeded. He then became even more of an opportunist, hanging on to power, doing whatever he needed without any particular vision.
I had the feeling he knew the problems were bigger than he was. Why try to cope with them? Let’s just, like a cork, float on the surface, and move in whatever direction the waves happen to be carrying you. (01:27:00) That was my impression of Kravchuk.
He represented a side, arguable an opportunistic side, of the Communist Party that many people felt was necessary in order to achieve independence. Do you see a way that either of those goals could have been achieved without Kravchuk and the institutional support that he brought along?
First of all, I was not a Ukrainian nationalist. I would have much preferred to see an orderly devolution of power. I was firmly in favor (01:28:00) of the Shatalin plan, which would have established the republics as the source of sovereignty, but in the very same act would have delegated much of the sovereign powers to a new inter-regional council. I was fullheartedly in support of that idea. That would not have meant total independence for Ukraine, in a way, because it would have been an orderly transition from a Soviet Union to something resembling an economic union. That was my favorite solution.
(01:29:00) Of course, that would have brought me into conflict with people like Pylypchuk, and so on. And Kravchuk seized that Ukrainians desire for independence and rode it. I don’t think it was necessarily the best thing for Ukraine, or for the Soviet Union. This is perhaps not a popular view to hold today having independence and all that, but I think the dissolution of the Soviet Union would have been a slower process, a more orderly process, and it would have given Ukraine a chance to develop its institutions. (01:30:00) It would have avoided the economic collapse, and the moral collapse. But in a way it was an impossible dream, because I guess you have to break down before you can rebuild. So Kravchuk as an opportunist, seized it. I don’t think it was something he believed in it in any way, but he saw it as a way to become president of an independent country, a way to power.
Tape 2 Касета 2
(02:00:00) …about the benefits of independence … people believed that Ukraine would be much more prosperous than Russia. In fact people who voted for independence, voted for it because they wanted to be on the right side of prosperity. Like the military. The Executive Director of the foundation was telling me how rich Ukraine was, and how Ukraine was being exploited by Russia, and by getting rid of the exploiter, Ukraine would be liberated. (02:01:00) So there was euphoria.
One of the projects in the foundation for which they wanted to spend a lot of money was to take an inventory of the wealth of Ukraine. I fought that project. There were academicians who had theories, which they didn’t think were theories, but methodology, for assessing the wealth. So there was a lot of that feeling, and because of that, had Gorbachev accepted the Shatalin plan, (02:02:00) Gorbachev would have had some tough sledding in Ukraine. It might not have been accepted in Ukraine.
There were a number of treaties, the All-Union Treaty among them, that proposed successors plans to the Soviet Union. Many people think Ukraine played a key role in this process. Were you watching what was going on there?
Yes. My friend Yavlinsky (02:03:00) had this elaborate treaty series that would have maintained economic ties, and Ukraine was the main spoiler of that, undoubtedly. Kravchuk was definitely the one who was standing for that. I think it was a populist action on his part, which made him popular, but it did not make him any different that what I have described to you.
Why do you think Moscow allowed Ukraine to exert independence or movements toward independence? (02:04:00) The very same people who would have been sent to Siberia, or had been sent to Siberia twenty years before were allowed to go forward …
Because rulers of the Soviet Union realized that the system was bankrupt. They were acting accordingly. They didn’t have the basis for repression because they didn’t believe in the system. They realized the system had to be changed.
I don’t know the answer, but I think there was a pretty general recognition (02:05:00) in the top leadership that things are falling apart, and failing. I think that Chernobyl played a major role in this. The failure of Chernobyl was an overpowering symbol of the failure of the Soviet system. They leaders were worried about the atomic energy in charge of a non-functioning system. If you look at the new institutions, they always had the word (02:06:00) “survival” in them. I used to joke that the old Soviet institutions are “druzhba” (friendship) and the new ones are survival. That was something the top leadership took very seriously. It was not apple pie and pretending to be concerned about atomic disaster. There was a sense of gloom and doom that seemed to pervade it at the time.
How much of the doom and gloom was recognizing the economic limitations of the system?
That was all part of it. There was a general sense that this was not a working system. Gorbachev started out with the idea of acceleration. More investment, an increase in production, renewed economic growth. (02:07:00) But then he realized that this was not practical, that you needed perestroika, which is structural reform. And then he realized you can’t have economic reform without political reform. So there was a development in his own thinking. But already in ’87, he asked Sakharov to return, so he was already advancing towards political reform.
Do you think the Ukrainians were right when they voted for economic reasons, most of them, for independence? Should Ukraine have been richer than their neighbors across the eastern border?
I think if I recall, by that time the Shatalin plan had failed, (02:08:00) the Soviet system was collapsing, whether it would have been better to do it slower, the fact was at that time, in an atmosphere, people were pretty disoriented. There was a revolutionary collapse. It was an abnormal environment where things that were previously forbidden became possible, and things that previously prevailed were no longer valid. So there was a lot of confusion. The idea of national independence was a (02:09:00) strong simple idea that people could cotton onto. It became, I think, irresistible.
The idea of the Shatalin plan was that by forming this new inter-governmental council, you would be then doing battle with the old regime, the old center. You form a new center and the new center is a reform center, engaged in conflict with the old center. Through that act it could attract popular support, it could be a focal point. But there was no support for the center. There was a total rejection of the center by the people. People didn’t want to have anything to do with this bureaucracy. (02:10:00) It was a kind of self-rejection also. People at the center realized that they were worthless, inefficient, ineffective. That’s the gloom and doom. Had the Shatalin plan been endorsed by Gorbachev, it is just barely conceivable that it could have created a new center, in which case, independence might have been delayed, which I think would have been better.
Given that the Shatalin plan didn’t take hold, and most voted because they thought Ukraine would be economically more advanced. Were the voters right in thinking that Ukraine would be richer than Russia? (02:11:00)
It was a mistake. It was a mistake for the simple reason, one reason. Ukraine is energy-poor, but rich in agricultural production. When you translate the GDP into market terms, the market value of oil relative to the domestic price is much higher than the market value of, let’s say, grain, relative to the Soviet price. (02:12:00) That was a fundamental error in calculation. The other problem of course, is that having a monolithic and totally integrated system without redundancies and without alternatives, cutting it up into separate pieces, none of them were viable. So industrial production became impossible because of the way Ukrainian factories were interconnected with other factories in the Soviet Union. It’s like cutting Siamese twins apart. They bleed to death. To some extent, Russia was salved by its raw material wealth. (02:13:00) So the collapse was much less in Russia than it was in Ukraine, although there was a collapse in Russia also.
You are in a very unique position to describe the role of the west — governments and multi-lateral institutions – World Bank, IMF– their response to the break-up of the Soviet Union and to building up Ukraine specifically.
That’s where I made a mistake, because I thought that when the west catches up with this very fast-moving reality, they would want to come and lend a helping hand. They would be rushing in the end to extend some large-scale assistance program to Ukraine, (02:14:00) as well as to other countries. There I was mistaken. I was right in the sense that they didn’t know what was going on, and they were lagging behind events. But when they caught up, they had no particular desire to assist.
I oriented this foundation to provide a channel for western assistance. An additional mistake I made was that I thought they would want to use that channel. When eventually they came, the last thing they wanted, particularly the Europeans, was to have anything to do with the Soros organization. Bureaucratically, it was unacceptable for them that somebody else can do, but they can’t do. So they insisted on doing it for themselves. (02:15:00)
Also they were very slow. The European Union, at that time European Community, had a fairly significant technical assistance program enacted for 1990. 400 million ECU for the Soviet Union. It was called something. This man Emerson, who recently got into deep water, in Moscow, he was in charge. He actually asked me to submit some projects to them, which we did, for Ukraine. Since it had been set up to deal with the Soviet Union, when the Soviet Union fell apart, (02:16:00) they didn’t know who do deal with, so the money was not spent.
One of our projects, the International Management Institute, IMI, Kiev, did get an award, of couple of million ECU. After a delay of several years, it was actually paid out. I think the 400 million ECU was never spent, or it was spent with great delay. The United States decided to treat Russia as the successor state of the Soviet Union. Russia was given the veto position in the UN. (02:17:00) That created a lot of problems between Russia and Ukraine. Ukrainians thought there were a great deal of assets being stolen, and they wanted division of the spoils. In actual fact, they got a very good deal by Russia assuming the debt. For them, having part of the embassy, which is a building, meant a great deal more than the billions of debt, which was merely a figure. The embassies had great symbolic….at the time, particularly the (02:18:00) United States, but also Germany, really looked to Russia, and gave preference to Russia, neglecting Ukraine. You had your Chicken Kiev speech, and so on.
Another example, we set up a program for military retraining. The idea there was to show that it can be done. It needs to be done. It would be a pilot projects, and would be taken over by western governments. It is really a job for the governments to reeducate the military, to re-deploy military. We did quite a good job; the program is still going on, and there is no western assistance coming through. (0219:00) So that was a dismal failure, and was also an error on my part. That was my biggest mistake in this whole effort, my misjudgment of western attitudes. I really thought they would rise to the occasion.
What would they have to do to rise to the occasion?
They did. They did. In the end they did, rather fortunately. When was Kuchma elected?
’94. At the same time there was a G-7 meeting in Madrid. At the instigation of Larry Summers in the Treasury, (02:20:00) the G-7 publicly stated they have an assistance program of $4 billion available for Ukraine, if Ukraine embarked on a reform program. That happened to coincide with the rather surprising election of Kuchma as president.
And that was a turning point. Kuchma was a responsible person. An engineer. A can-do kind of man, who said, there is a problem. It is there to be resolved. There has to be an engineering solution. He was ready to confront the issues. He realized that Ukraine was (02:21:00) not viable as an independent state the way it was going. The $4 billion focused his mind in a way it would not have focused otherwise. He was no believer in market economy. He doesn’t understand how markets function. He knows how an engineering firm is run, and for him running Ukraine, on a larger and more patriotic basis, like running his firm. So he was not a reformer, and economic reformer; he had no understanding of it. But he understood that Ukraine had a deficit, an energy deficit in particular, and he needed $4 billion, because the deficit was $4 billion. (02:22:00) So he was determined to get that money. And he was determined to sign whatever agreement it took to get that money. So that was an occasion where the offer of assistance changed the direction of the economy. I certainly saw that as a turning point.
I met with Kuchma once before his election. He came to America and we were going to have lunch together with Nixon and him. And Nixon died that day, so we didn’t have lunch. We had breakfast together; that went on for a few hours afterwards. We had a very good talk. (02:24:00) He was there with Tabachnik. We established good rapport. Tabachnik was very negatively disposed towards Havrylshyn and Kravchenko, and the other people around the foundation. He thought they were nationalists, particularly their devotion to the Ukrainian language. So he regarded them as enemies. I actually connected Kuchma on the telephone with Havrylyshyn. So there was some bridge established there.
I was favorably impressed by Kuchma at that time. Contrary to what some people said, I had absolutely nothing to do with the elections. There was no involvement on the part of the foundation in the election. (00:24:00) But when Kuchma was elected, which was a surprise, and you had that offer, I went to Kuchma nad I said “I’m ready to help you to prepare for economic reform.” It so happened Shpek, who was a graduate of IMI and devoted to Havrylyshyn and the whole thing…Shpeck was very receptive. We sent in a team, Anders Aslund, who turned out to be a very good communicator. I was also able to draw the attention of the IMF, (02:25:00) that there was real change here. And Larry Summers, and so on. Prepared the ground in Washington. In fact an agreement with the IMF was concluded in remarkably short period. Everybody was surprised how this could be done. There I think the economic team and the fact that the money was there, this was a real change. You can say it didn’t really change very much because Ukraine didn’t do very well afterwards. But still, something has started. Then of course, no sooner has the program begun, but it started to slip, but that is another story. (02:26:00)
But that is the answer that shows that economic assistance could have made a difference, because in this case it did make a difference.
Who in the west do you think “got it”, understood? What other political leaders, observers, academics also seemed to understand? Brzezinsky, I know, is one.
Yes. Very much so. Very much so, but Brzezinsky’s approach was more geopolitical. In other words, he recognized the importance of Ukraine, and independent Ukraine, and this is of course we agreed with him that having an independent and (02:27:00) viable Ukraine has to mean that you don’t have an imperial Russia. Because if you have an Imperial Russia, Ukraine would have to be part of it. So if you can have an independent and viable Ukraine, it means that the threat of an imperial, centralized Russia is greatly reduced. That was his, and remains his main point. And I think he is right.
The people in Poland were very keen on Ukraine, and an independent Ukraine, having good relations and so on. People like Balcerowicz. A number of them worked in the team that I sent in, in fact the first team had Dombrovsky, who used to be (02:28:00) Balcerowitz’ second, was part of the team. And Professor Valesch also went to Ukraine. There was a very good attitude in Poland.
And then I think Larry Summers was very, very clear on it. And pushed for it. David Lipton, who was Larry Summers’ assistant, used to be Jeff Sachs’ assistant in Poland, certainly. I would say that those are the people I’m aware of.
Tape 3 Касета 3
(03:00:00) … My advise to Ukraine would not have been that all different at the time.
Although I did quite a bit of travelling insecondary citiesthroughout Ukraine when I worked at the Embassy, and every time I’d go, the “Chicken Kiev” speech was something they always talked about …
… It was bad (smiles) …
… (laughs) It wasn’t an irrational thing to deliver. (00:3:01:00) It was just the way events unfolded.
Yes, and had America done something on the positive side, they would have been in a position to warn against acting unilaterally and so on. But since they were not doing anything positive …
The only thing that the United States was really concerned about in Ukraine was atomic weapons. That was also counterproductive, because at first the Ukrainians were very eager to cooperate. They were giving up their weapons. But then they realized that the only bargaining chip they had was the atomic weapons and the Chernobyl disaster. (03:02:00) The only concern, the only genuine engagement was with the atomic threat. I think that Brzezinsky would question whether it was so wise to disarm atomically the Ukraine. That was the main engagement. The Nunn-Lugar Act. I think it was a very shortsighted point of view. (03:03:00) It became counterproductive because it became the only bargaining chip, therefore you have to hang on to it.
You managed to identify, with remarkable precision, the people and organizations that were able to be effective in Ukraine, in making the kinds of changes that your organization espouses …
That’s because we had a different approach. We were empowering local people. So (03:04:00) there are some people we empowered, and they didn’t amount to anything; they fell by the wayside. Others we empowered and they came through with shining colors. So the ones that came through, became more important. It was a process of self-selection. Very early on, the foundation ran an essay competition on economic reform, and it identified people who then became part of the reform process because they won essay prizes.
It was not that our judgement of people was so good, but the process of hit and miss, that is empower, reinforce those who run with it and drop those who don’t. (03:05:00) This throws up the leaders. We spent a lot of effort on Pylypchuk; there was another fellow that was very active at the time, and he turned out to be a windbag, so we just dropped him. We brought him to conferences…so it wasn’t that we had some great insight, it’s just the way we went about it.
Pynzenyk was certainly someone Bohdan Kravchenko worked very closely with, a supreme success story. Serhiy Holovaty was able to use the Legal Foundation, and is now the Minister of Justice. Probably one of the most fervent and genuine supporters of an open society that one could hope to see in Ukraine (03:06:00).
Yes, I have a very high opinion of him. But, you know, we had a lot of trouble with this Foundation, because it was unwilling to subordinate itself in away. I also liked Holovaty, but I was a little bit suspicious … bacause he speaks such good english (smiles) … I could communicate with him better … I think he is a good man but … unfortunately Halyna Freeland turned out to be much less … she became a rather negative force there. She wanted to run it, she was great conceptually but she was not a good (03:07:00) administrator and she would not let go. So actually the Legal Foundation has not been as effective as it could have been.
One of my responsibilities at the Embassy was overseeing the Rule of Law project in Ukraine. So, I saw all the delegations that would come in from AID and the State Department. They visited all the Rule of Law programs throughout the Soviet Union and they were absolutely stunned by how effective the Legal Foundation was. They said there was nothing even close to as effective throughout the Soviet Union.
I also would say that part of the fault was ours, because we did want to have an insight. In the Foundation we had people like Kravchenko,that I trusted implicitly. He was really oustanding because he really delivered. Whenever something came up and needed to be done (03:08:00) he said “I’ll do it” and he did it! He had my confidence. There was nobody in the Foundation who had my confidence; therefore we wanted an accounting and they couldn’t do it and they became increasingly hostile, resisting. So, actually in terms of administrative success, it was not. And, I think, as I said, that part of the failure was ours, that we didn’t have somebody there … otherwise, I think we could have done a lot more. And I must say that we spent an inordinate amount of … time on it. In terms of the amoung of money that we spent on it, it took ten times as much time (03:09:00) (laughs).
The thing that impresses me more about Holovatiy is his almost instinctual democratic orientation. You can bring almost any issue, from freedom of religion to freedom of the press, voting practices, he instinctively has the reactions of a democrat withoug even stopping to think about it. We talked about the brighter stars of Ukraine or lackof talent and he stands out as an exception. Are there any other peole who you think are particularly promising?
I would say that Shpek turned out to be a winner. Compared to Pynzenyk, who probably is better prepared (03:10:00) theoretically, maybe superior to Shpek as an academic. But Schpek has a basic understanding of process. He’s a good administrator, and very particularly good in utilizing advisors. So Shpek was a real winner, and had a lot to do with moving the whole process with the IMF forward. We provided him with advisors, but he was very good dealing with the IMF.
The other pillar of the reform is Yushchenko, who is a less pliable (03:11:00) and tougher, personality; he really fought some battles controlling the money supply. He was really the key to keeping the lid on spending. The whole setup boggled the mind, because there was a disconnect between the budget process and the spending process. Then there was a reconnect when it came to monetary emission. The budget was within the guidelines, but spending was totally out of control. When it came to paying the commitments that the spending ministers undertook, there again there was control. The result, of course, was (03:12:00) bills remained unpaid. Then one Saturday morning when Yushchenko was out of town, they issued all the money, and broke the IMF agreement.
Is there anything else you’d like to add, I know you need to catch a plane.
I think we’ve covered a lot of ground. We actually have a few more minutes, so if I think of something, I’ll tell you.
(03:13:00) Yehanurov we haven’t talked about. He was a far less determined or dynamic personality than the other two. He is in charge of privatization, but he seems to have come along now, slowly. He’s getting some momentum. But the privatization process has no constituency, and there is no conception of how to make it work politically, because you need someone who wants it. If the managers could get rich on it, (03:14:00) they would have an interest. But as it is, the managers are not given enough, the workers are not given enough. At the same time, the branch ministries are not being dissolved; it’s a pretty bad mess as far as privatization is concerned. It’s also something that is imposed from the outside. Kuchma himself doesn’t care for it.
There was quite a bit of talk about land privatization, in December of last year. The IFC was asked by Kuchma’s office to prepare draft proposals (03:15:00) for land privatization. Then Kuchma put it off. What do you think it will take to get privatization moving forward?
I’ve been giving it a lot of thought. [Perhaps we could order a taxi?]
You see, there is the mass privatization scheme, which is not a well thought-through scheme, and there is no energy behind it. I’ve been pushing for a small team of foreign advisors helping Yehanurov to sell strategic stakes through a transparent auction process. (03:16:00) Yehanurov has now become very keen on this, and is pushing for it. I sent people from Morgan Stanley there, and so on. Maybe this can be put together, and that can help. I think you need to combine the sale of strategic stakes with mass privatization, the voucher privatization.
Dani Kaufmann, of course, he is an outstanding … talking about other agencies, (03:17:00) he really played a very good role.
A taxi is on its way. Thank you very much for taking time to talk with us today.