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Ukraine Finance Minister Says Economic Success Is Key To Ending Conflict

AUDIE CORNISH, HOST:

When it comes to the conflict in Ukraine, you could say that in some ways, Natalie Jaresko is on the frontlines. She's the country's finance minister, and she argues that Ukraine's economic success is the only way to end the war fueled by Russia in the east of the country. NPR's Michele Kelemen caught up with her during her latest swing through Washington.

MICHELE KELEMEN, BYLINE: Chicago native Natalie Jaresko exudes confidence, wearing the Ukrainian colors, a sky-blue dress and yellow beads and talking up her government's big reform plans. She was here to make sure the International Monetary Fund moves ahead with the massive bailout package.

NATALIE JARESKO: This isn't the same situation as Argentina or Greece. There's a moral imperative here. This is a nation fighting for its sovereignty, its territorial integrity, the principles of freedom and democracy that, you know, Americans know better than anyone. And we're not rejecting reforms like other countries have. We're embracing those reforms.

KELEMEN: Those reforms have failed in the past in Ukraine, a country that Transparency International ranks among the most corrupt in the world, more corrupt, even, than Russia. But Jareski says this government is determined to level the playing field for businesses, and this time is different. It has to be, she says.

JARESKO: If you compare it to East European history - Poland, the Baltics - never has someone had to do the reform in such an accelerated fashion with tanks - foreign tanks - in their country.

KELEMEN: Ukraine is actually fighting a two-front war, says Karen Donfried, president of the German Marshall Fund of the United States and a former White House advisor on Europe.

KAREN DONFRIED: It's hard for Ukraine to get on a path to economic health if there's a conflict on its territory, and it's hard to manage the conflict if Ukraine is in very difficult economic and financial straits. So these, necessarily, are interconnected.

KELEMEN: The finance minister who's trying to drum up investment says the conflict is only in the east of the country on less than 10 percent of Ukrainian territory, but as Donfried points out, the separatists and the Russian troops backing them control a key part of the country.

DONFRIED: That part of Eastern Ukraine is the industrial heartland of Ukraine, so the economic hit on the Ukrainian economy is more like 20 percent of Ukraine's economy. So Russia is having a profoundly negative impact on Ukraine's economy through that ongoing conflict in the East, without question.

KELEMEN: Ukraine's finance minister, Jaresko, agrees the war in the East is draining the budget.

JARESKO: Estimates are 5 to $7 million per day. That, again, is an enormous cost, but I have to say, the interest alone on our debt is costing us the equivalent - 5 percent - this year of GDP. And that's why these restructuring talks are so important, especially in this difficult situation.

KELEMEN: In those talks, Ukraine is trying to convince its creditors to accept what bankers call a haircut, but Jaresko says the talks, including with private U.S. creditors, haven't made much headway. She did get some welcome news from the IMF's number-two official this week who suggested that the International Monetary Fund might move ahead with its bailout even without a debt-restructuring deal. One Western diplomat says the consensus is Ukraine needs some breathing space. The U.S. ambassador to the UN, Samantha Power, made a trip to Kiev this week to give the reformers added encouragement. She told Ukrainians everyone's watching to see how the country faces down corruption.

(SOUNDBITE OF ARCHIVED RECORDING)

SAMANTHA POWER: And all of the autocrats, kleptocrats, oligarchs and bullying foreign powers out there - they are watching too, and they are so rooting for you to fail. But know this. You are not alone.

KELEMEN: Western diplomats are reluctant to speculate on Russia's end-goals in Ukraine. It's clear that Moscow wants to keep its neighbor off balance, but as some experts say, Russia doesn't want Ukraine to fail completely as an economy. Russia does have financial interest in the former Soviet state and holds several billion dollars in Ukrainian debt. Michele Kelemen, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

Michele Kelemen has been with NPR for two decades, starting as NPR's Moscow bureau chief and now covering the State Department and Washington's diplomatic corps. Her reports can be heard on all NPR News programs, including Morning Edition and All Things Considered.

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