He says the US’s diplomatic response to Russia was being hampered by policy indecision and special interests within the European Union, which is one of Russia’s biggest gas buyers.
“We have approached the US government to impose sectoral sanctions on Russia in three areas: military co-operation, energy and finance,” says Shlapak. “But if [Russian] finances are being frozen in the US, [the Russians under sanction] shouldn’t then be allowed to go to the EU.
“The Americans can go further, but they are being held back by the EU.”
Oleksandr Shlapak, Ukraine’s finance minister
He adds: “The Americans are cutting military cooperation with Russia, but in the meantime the French are still selling them warships,” referring to the two Mistral-class assault ships being built for the Russian navy at a French shipyard.
The French government owns 33% of the shipyard owner, STX France, and the Hollande government in Paris has resisted pressure from Washington and Kiev to cancel the contract with Russia that was signed in 2011, long before Moscow’s adventures in Ukraine this year.
With jobs at stake in France’s sputtering economy, its foreign minister Laurent Fabius said in May “the rule with contracts is that contracts which have been signed are honoured”.
That was an about-face by Paris, which had earlier dangled the threat of cancellation of the Mistral contract after Russia’s first territorial incursions into Ukraine in February and March. That threat prompted a furious reaction from Moscow, claiming France’s reputation as a reliable international supplier of military materiel was being undermined.
Ukrainian officials also tell Euromoney that Britain was profiting from Ukrainian discomfort as a recipient of billions in capital flight from Russia.
The European Central Bank says as much as €160 billion has fled Russia since the Ukrainian crisis erupted in November, around three times the amount officially admitted by Russia. The rouble has fallen around 15% against the dollar since then, when protesters first gathered in Kiev’s Maidan square for mass demonstration that ultimately led to February’s revolution and the installation of an anti-Moscow government. The Ukrainian hryvnia has lost around a third of its value since the revolution.
With next-to-no investment activity in post-revolution Ukraine, Shlapak and the three-month government are coming under pressure from Ukrainians to arrest the slumping economy and implement the reforms promised in the heat of the Maidan revolution.
Shlapak acknowledges the criticism and tells Euromoney “very decisive moves need to be made, maybe something close to shock therapy … but Ukraine is not ready for the more extreme shock therapy as these people recommend”.
For an inside look at Ukraine’s economic and political crisis, featuring a blistering interview with the country’s finance minister and central bank governor, read Euromoney’s June feature.