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Sunday, May 24, 2020

ANALYSIS/OPINION:

No time is good for a national government to renege on written agreements. This is especially true when that government is trying to prove to the world it is finally being supervised by honest administrators and seeking further foreign investments. Such is the case of Ukraine’s current handling of the “green tariff,” which involves the implementation of renewable environmental-friendly energy sources of wind, solar and hydroelectric.

For centuries, Ukrainian citizens were able to rely on their vast reserves of coal. In the 20th century, under the control of the Soviet Union, nuclear power was introduced. The 1986 Chernobyl reactor disaster just inside Ukraine’s northern border contaminated desires to further pursue this energy source. 


The administration of President Viktor Fedorovych Yanukovych starting in 2010 pushed solar energy. In reality, Mr. Yanukovych was pushing Activ Solar, which was owned by close ally Serhiy Klyuyev. By requiring use of only Ukrainian-made equipment in the solar industry Mr. Yanukuvych excluded foreign investment and Activ Solar controlled 85 percent of the very limited industry.

Following Mr. Yanukovych’s 2014 removal from power and his subsequent exile in Russia, the alternative energy situation became very critical. Pro-Russian forces seized control of the coal-rich region of eastern Ukraine. The Russia problem became more severe when Russian President Vladimir Putin also seized the Crimea peninsula from Ukraine

Realizing the need to become more energy independent, and recognizing the value of renewable energy sources, Mr. Poroshensko offered outstanding incentives to investors, which foreign corporations, Ukrainian politicians and in-country oligarchs jumped on. The end result was green energy costing significantly more in Ukraine than anywhere else in Europe. 

The situation for Ukraine has greatly improved since those energy incentives were enacted. The country now has meaningful security support, to include American soldiers on the ground providing training support to Ukrainian troops. 

The greatest improvement for Ukraine came in 2019, when the citizens overwhelmingly voted out Mr. Poroshenko in favor of Volodymyr Zelensky. Mr. Poroshenko was no less corrupt than Mr. Yanukovych.  

A law school graduate and former television celebrity, Mr. Zelensky is fulfilling his campaign pledge of cleaning up the corruption that dominated the Ukrainian government.     

Among his many problems, Mr. Zelensky is faced with the “green tariffs” issue. Members of his government wish to retroactively negate the investment agreements of the previous administration. Supporting Mr. Zelensky in finding a proper resolution is Prime Minister Denys Shmyhal, who is currently preparing to address the problem. They are faced with three issues.  

The first is the expectation of a government keeping written promises to investors. A promise is a promise and the pioneer investments should be rewarded for their risk they took to invest in Ukraine.

The second is availability of existing energy. Russian allied separatists and Russia itself control the nearest coal sources. Purchase from these sources results in Ukraine having to pay for its own coal or buy from a nation it has been at war with since 2014. Suppliers can shut off either source at any time. Fossil fuels from the West are much more expensive. The need for renewable energy is ever increasing.              

Third is the importance of attracting further foreign investment in all Ukrainian industries. When new governments renege on previous agreements, especially retroactively, a bad precedence is established. Ukraine offers enormous opportunities for multinational corporations. To grow and further stabilize the country, Mr. Zelensky must have continuing international investment which comes from confidence. 

Mr. Zelensky and Mr. Shmyhal can lead their nation to a workable solution. The laws concerning “green tariffs” can be rewritten for all future development and implementation, with immediate enforcement. Incentives on existing projects will expire at the end of the decade, unless extended in agreement with the investors. A decade is a long time, but it can feel even longer when potential investors are reluctant to enter an agreement knowing the government has a history of reneging.

The world is about to see a change concerning international investment and trade. After decades of the Chinese government conducting hostile computer network operations against Western nations, stealing intellectual property, taking control of the pharmaceutical medicine industry, advancing its military into Japanese and Philippine territorial waters, and using government influence over its manufacturing industry to create enormous trade deficits, it has taken the coronavirus to make the world understand the dangers of becoming too reliant on China. Around the globe, people and their governments are finally realizing the need to find other hospitable countries in which to develop trade relations and investment opportunities.

With its abundance of natural resources, agricultural capability and a hard-working population, Ukraine is in an excellent position to prove itself as an outstanding player in the field of international business. This is the time for Ukraine to modify, not to renege on existing written agreements.  

• Wes Martin, a retired U.S. Army colonel, served in the Army Military Police and in law enforcement positions around the world.


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