Russian aggression is nothing new to Natalie Jaresko. Nine months after the annexation of Crimea in 2014, the former investor was called in to wrest Ukraine’s economy from a deep recession. During her time as the country’s finance minister from 2014 to 2016 she regained the trust of its creditors, restructured its debt and secured a $17.5bn support package from the International Monetary Fund (IMF).
When we met via video call, there was a palpable sadness underpinned by the knowledge that what we discussed today may be gone tomorrow. The destruction of port cities like Mariupol rendered talk about exports redundant, while Ukraine’s rich farmland was being torn apart by Russian tanks and cluster bombs. “It’s hard to talk about an economy when you don’t know what will be left at the end of the day,” she said.
Jaresko has previously held roles at the US state department and co-founded her own private equity fund, Horizon Capital, before her time in the Ukrainian government. She now chairs the Aspen Institute in Kyiv, and is a non-resident fellow of the Atlantic Council. Her voice cracked as we discussed the immediacy of the war in Ukraine. “This isn’t like when I was minister of finance,” she said. At that time, the annexation of 7 per cent Ukraine’s territory and 20 per cent of its GDP was unimaginable in a 21st-century liberal economic context. This time, financial support will again have to come from international investors and global financial architects like the IMF and World Bank – but assessing what will be needed is impossible. “We don’t have an isolated or concrete set of loss, we have an ongoing operation. We are talking about hundreds of billions of dollars to rebuild, everything is being destroyed.”
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Jaresko said the conflict should not have come as a surprise. She spoke of her struggle to convince governments to take Putin’s threats seriously. “They said no, to the very end,” she said. Why have Western governments underestimated Putin the aggressor for so long? “You know, if people say he’s irrational, there’s a side to that I believe, but there’s also another part which says he’s quite logical,” she said. “We can’t understand madmen, so we apply our logic, and we tend to want to believe that people are human and would not do what you see happening right now.”
Putin has been planning the destruction of our liberal world order for more than a decade, she said. “He’s been through every tool in his toolbox.” He has carpet-bombed Chechnya, funded a devastating war in Syria, poisoned opponents on British soil, interfered with international elections. “We watched it, we saw it, and we did nothing, so it’s logical that he thought he could invade and no one would do anything.”
And what of the West’s response? Sanctions imposed on Moscow are falling short because international leaders fear the impact of rising energy prices in their domestic markets. Last week, the US president, Joe Biden, defended his decision to preserve access to Russian energy in order “to limit the pain the American people are feeling at the gas pump”. But this position is at best inadequate and at worst a deliberate choice to put the needs and votes of Americans above the lives of those fighting for freedom in Ukraine, Jaresko said.
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Western sanctions – which have so far targeted Russia’s central bank (CBR), state-owned banks and several high-profile individuals – are crushing the economy. The rouble has devalued by 40 per cent, prompting Moscow to introduce capital controls and issue a ban on the selling of Russian assets to stem the outflows as international investors look to exit the country.
But Jaresko said broader packages of measures do not go far enough. Sanctions should be extended to cover all state-owned banks and oil and gas companies in Russia and Belarus. This should also include Nord Stream 1, the natural gas pipeline that carries some 55 billion cubic metres of gas a year from Russia to Europe.
“President Biden should not be afraid of explaining to the American people that it is going to be less costly for us to right now to sanction their oil and gas companies than it will be to have to fight World War Three,” she said.
“On the one hand we’re providing [anti-aircraft] Stinger missiles and paying for that from the US budget, and on the other we’re giving them $700m a day to finance the war,” she said. “We need to stop financing the aggressor. It is only by that kind of isolation that we have a chance of ending this war.”
The UK and US’s failure to set tighter laws on beneficial ownership makes them in part culpable for the war, she said. “This our unique contribution to this crisis, this war… The United States and UK have to stop allowing for these shell ownerships of assets without seeing through the beneficial ownership. The single most important long-term thing that can come out of this [war] is putting an end to it.”
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Jaresko was in office when in 2014 the EU froze the assets of ex-Ukrainian president Viktor Yanukovych, who fled the country to Russia and in 2019 was handed a 13-year sentence for treason, which he has not served. In her experience, the cost of such effort is high and the outcome is uncertain. Yanukovych was charged with opening the door to Russia’s annexation of Crimea and the conflict in eastern Ukraine, which has culminated in this war.
“Everybody was helping us but the only Yanukovych assets that were ever actually frozen were in a Ukrainian bank. Everything else was hidden in wrappers, like [UK] prime minister [Boris] Johnson said, it’s like a matryoshka doll.”
“If [the asset] is not in the person’s name and you sanction the person, you can’t take it even though you know it is there. It is a very long, costly process,” she said.
Weakening the elite, Jaresko said, is essential to pressuring Putin, but it will not be easy. “The idea is not to hurt the Russian population, but to get the Russian population to say stop the war,” she said. “[If his elites are threatened], the isolation of the economy is the only thing that will have a chance of influencing Putin to stop.”
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