Discussion with Oleg Ustenko, Ukraine's chief economic advisor, on sanctions and more


March 10, 2022, 8:00 AM to 9:00 AM EST
Virtual Event

Oleg Ustenko (Chief Economic Advisor to Ukrainian President Zelenskyy) and Jacob Funk Kirkegaard (PIIE)

Event Summary

Chief economic advisor to Ukrainian President Zelenskyy, Oleg Ustenko, discussed sanctions and other economic dimensions of the Russian invasion of Ukraine in a conversation on PIIE’s virtual stage. Jacob Funk Kirkegaard, nonresident senior fellow at the Peterson Institute for International Economics (PIIE) and resident senior fellow at the German Marshall Fund of the United States, will moderate the conversation.


Jacob Funk Kirkegaard:

Hello, my name is Jacob Kirkegaard and I'm a senior fellow at the Peterson Institute for International Economics, and on behalf of the Institute and our President, Adam S. Posen, it is a pleasure to welcome you to our digital platform this morning, afternoon, or evening depending on where you join us from around the world.

Of course, all Peterson Institute events are important and timely, but, in all honesty, there are some events that are more timely and more important than others. I'm happy to say that we have one of those events right now, because it is a particular pleasure for me to welcome to our online platform Oleg Ustenko, the chief economic advisor to Ukrainian President Zelenskyy today to discuss the government of Ukraine's economic vision for Ukraine, both in the short- and the long-run, and not least how he and his colleagues in Kyiv believe that we, around the world, what we can do, particularly from the United States and the European Union, what we can do to help Ukraine's economy and efforts right now.

Dr. Ustenko was appointed chief economic advisor in May 2019, and his brief covers all major economic policies, including macroeconomics, investments, business climate, and, of course, everything related to the current tragic events. Dr. Ustenko has extensive experience in both the private and public sectors, including work at the World Bank, OECD [Organization for Economic Cooperation and Development], and senior government levels. He holds a Master's from Harvard and a PhD from Kyiv State University.

Our event will take one hour and you should have received an email link through which you can submit questions to be posed to Dr Ustenko later in the program.

But first of all, dear Oleg, welcome today, and I hope that circumstances are as good as they can be.

Oleg Ustenko:

Thank you very much.

Jacob Funk Kirkegaard:

But first, let me just ask you to try again to spell out for us how you and your colleagues think that we, government and the rest of the world, corporations, private citizens, how can we best help the economy of Ukraine and your efforts at this moment?

Oleg Ustenko:

Thank you very much for this opportunity to share with you my views from Ukraine.

Let me start by saying that the humanitarian disaster now in Ukraine is much worse than anybody can imagine. Babies are dying. You obviously heard yesterday about this bombing of the maternity hospitality in Mariupol.

You understand that the situation is a disaster, I would say. Really, much deeper than somebody can imagine. People are living underground, including here [in Kyiv], including in Kharkiv. They are spending their time in the subway metro [with] very little clean water.

We have family members a 15-minute drive from Kyiv who are surrounded by Russian fascist troops with no possibility to get out. Two cell phones from the family were already taken by soldiers, they immediately reported it to us, and they were using only one cell phone which was left with a kid, so we were able to block everything.

 People are living without food, without water, for example, just a 15-minute drive from here, our family members needed to melt snow in order to have at least some water—initially they were using it as technical water [for industrial use], now as we understand they are boiling this water and drinking this water.

We have hundreds of deaths, but soon it will be thousands. For me, and for us here on the ground, it's very clear that the Russians are losing the war, but they do not want to tell their boss. So the boss, this Vladimir Putin, doesn't really know what is really happening and he still believes that he is managing their army and managing this country, but in my view, it's very, very clear they are losing the war.

So you have these people on the ground, but his army are not willing to give any bad news to their boss, that's why they started to kill civilians. Why are they doing that? They're trying, or they're hoping, not to capture [territory] but to get in to the big cities of Ukraine. That's why they so desperately aggressive now.

Of course I know that you are an economic think tank and that you don't spend much time on the war, and I am happy to talk about economic elements today, but let me emphasize that what we need for support is more weapons and ammunition for our army. This is critically important. We are entirely focused on destroying our enemies. We are trying to make sure that we do everything we can in order to send home every Russian tank, every armed vehicle, back to Russia. We are killing their soldiers, but for that we need weapons, we need ammunition. And what we need most of all is, of course, to save Ukrainian lives.

This leads me to the key economic points of today. First of all, there must be a complete embargo on the purchase of energy from Russia. We are really, really, really grateful to the United States of America, who were really, really leading these efforts by introducing a ban on Russian oil and gas as soon as possible.

I know how pipelines work and I understand that Europeans do not want to be cold. As I understand, the temperature now in Berlin is somewhere close to seven degrees Celsius. In France in Paris it's the same, and it's going to be a little bit colder tomorrow it sounds like from the weather forecast, but I can assure you that it's much, much colder underground in Ukraine, where people are hidden. In all these shelters, where they have to spend days and nights, not eating for days. People are trying to save their lives. In Kharkiv, children huddle together with almost no blankets, with very few toilets, underground, with people who are crying, without access to drinking water.

So I would say that what is really needed to be done is to introduce the full embargo, worldwide, on Russia's oil and gas industry. This is blood money. Really, blood money, which Europeans are still paying to this monster, in order to kill our people innocent people, civilians, in our country, in Ukraine. This is something which is really needed to be done, and if the governments of Europe are still discussing this issue—which I think is just not acceptable because we are losing our lives here, losing our kids. The number of reportedly raped women in the country—we already have more than 100 reports that kind, of raping our women.

In my view, this is something which is necessary to be necessary to be done. That's why, today, in several newspapers, including the UK, Austria, France, and other countries, I published an open letter to the people of these countries [arguing] that they have to pull the plug. If their governments are not able to stop supplying the Russian monster with their bloody money, the people of these countries have to act very quickly and very hard in order to stop that. Therefore, we are initiating a boycott campaign for all Russian oil and gas. Otherwise, I don't see why they are, with the one hand, feeding the monster, while the other hand is trying to help us in different formats and sending clothes, food, water, and all that stuff. For sure, it should be stopped.

If it's not stopped, we have a very clear idea for how it's going to be stopped. We are already tracking each tanker loaded with this dirty Russian oil, each tanker is tracked. We know when a tanker is coming. We are tracking it, and we will make sure that this tanker should not be and will not be unloaded in any ports of the world. And I also count, not only on the people of the world, but on institutions, like you, who might [carry] this message worldwide, because it's really important. We have to cut off Putin from this bloody money which he is using to kill our people.

For me it's the most important question, and if we have evidence that somebody—any private or public company—is buying that kind dirty oil from Putin, then we will make every effort to destroy that shareholder value for this company. It should be a common initiative all over the world, and, as I said, we have already started [tracking] it.

Another point, which I guess is also an economic issue, we have to discuss [the war] in terms of global food security. As you might know Ukraine is an important player in international agromarkets. In some products, for example wheat, we are the number five [exporter]. In terms of sunflower oil, we supply 50 percent of the international market. The same for barley and some other [agricultural products], we control around 15 to 20 percent of several commodities on agromarkets.

But at the same time, the current picture is appalling. Since 15 percent of our economy is dependent on the agricultural sector, we have to do our homework, and our homework is to work in the fields. We usually start our spring sowing campaign in the first week of March, and it should be completely finished by the third week of April. This is a very short period of time in which we do our sowing and our field work on our land. If we are not able to complete this work during this period of time, then won't have anything at the end of the [season]. It also means it's going to be a huge challenge for the international market.

It's very clear that [food] prices are going up. We are going to observe food inflation, and if inflation rises then you have another global security issue. In Poland, they spend 1/3 of their consumer basket on food. In France or in Great Britain, it is somewhere around 1/10 of the consumer basket. But there are countries, for example in Africa, where they spend 90 percent of the consumer basket on food, and these countries should be supported—they are supported internationally—which means that the check to support these countries is going to be increasing very soon. Even now, if you go to the Chicago exchange, you can observe that the prices for agro-commodities are increasing already.

We should keep the economic point of view in mind when we are talking about peace efforts in Ukraine because [war poses] significant and serious challenges which the world is now facing. The sooner we can stop the war, the better for [global] food security. So let me stop here, and take your questions.

Jacob Funk Kirkegaard:

Thank you for conveying, in a very comprehensive manner, the truly tragic and dire situation that you face in Ukraine. You already mentioned the importance of some sanctions, energy especially, I would like to ask you, on this issue of sanctions—there are a lot of Russian individuals, potentially going forward also state entities, whose assets are being seized around the world—do you have a view on the use of those assets? Also, with an eye to the inevitable, given the destruction that is being unleashed on Ukraine right now, how will you, the legitimate government of Ukraine, go about your vision for rebuilding your country and how do you plan to finance that reconstruction?

Oleg Ustenko:

Thank you for this question. Look, currently around 50 percent of all businesses are not operating and those which are still operating are not at 100% of their capacities. The situation, in terms of economic growth, firm support, all that stuff, is going to be really very depressing, even if the war can be immediately stopped—and I hope that the war is going to be immediately stopped.

To [give you] an understanding, very preliminary estimates we have in the office for assets that have already been destroyed [put] the value around $100 billion US dollars. $100 billion. This is a very approximate view in terms of what has already been lost.

Of course, when peace [returns] to my land, we have to rebuild the economy. Rebuilding the economy also means rebuilding the assets that were destroyed, this $100 billion of roads, bridges, hospitals, and equipment which these people destroyed. For example, I don't know whether you heard or not, but these people bombed a children's oncology department in Kyiv and some very expensive equipment was destroyed, and keep in mind we are not a rich country. Luckily the kids were able to survive, but this is what happened.

We are counting on the money that has [been frozen] in Russian central bank foreign exchange reserves, and we are talking somewhere around $300 billion. There are several possibilities for how to use this money and one is for sure, we have to support those [Ukrainian] civilians and refugees which we have all over the world. This is one way, to support people. Part of this money might be used directly for rebuilding our destroyed infrastructure, destroyed assets, so this another way. Then, of course, we are counting on the possibility to continue [targeting] the properties of Russian oligarchs.

For this we need to create, and I think the United States may be willing to play a leading role here, some kind of special recovery fund for Ukraine. One of the sources of money, whose assets have already been [seized], is the Central Bank of Russia. Everything which is going to be taken away in the future should immediately come into that fund. I know that we will probably not be able to sell the assets immediately, but we can issue bonds against those assets. The money received from selling these bonds might become a source for financing this Ukrainian peace and recovery fund.

This fund would be extremely useful for many reasons. The first reason is, of course, we have to rebuild the economy. But another reason is that it would be an extremely positive signal we can send to the world and the people of my country. It would say, "you've lost a lot, lost many people, some people have been killed, families destroyed, but don't worry about the economic side of the war because that side is going to be covered by us, internationally. Don't worry about that. We already have the money." That message, if we are able to do that, would be extremely useful. It would really help Ukrainians who are fighting now against these Russian fascists.

Jacob Funk Kirkegaard:

Thank you very much. That was again an incredibly comprehensive question and one that I think is fair to say offers quite a bit of help and hope for the Ukrainian people.

Speaking of hope, I would like to ask you again, a sort of perhaps forward looking, more long-term question. It's no secret, Foreign Minister Kuleba had an op-ed in a number of newspapers yesterday, that your government is seeking, I think the word is "expedited", membership of the European Union (EU). I think it's also fair that we know that that this is legally and politically, going to be very difficult, but I would like to ask you to describe for our audience you and your colleagues longer-term economic vision for post war Ukraine. Because it's no secret that among the Russian demands, so far at least, has been that Ukraine obviously should not be part of NATO, but it seems also should not be able to join the EU. Could you tell us why this is so important for you right at this moment?

Oleg Ustenko:

The EU was the initial Ukraine's initial goal, going back 10, maybe 10 plus, years ago. NATO was on the table. We were discussing this issue, but the EU was the most powerful argument for many things, including political things, in the country, in Ukraine. So the EU was always, I wouldn't even say the goal, it was always the dream for Ukraine.

Now, Ukrainians are fighting. We are fighting not only for us, we are fighting for the civilized world, and we are fighting for Europe as well. So when the EU started this process—I would call it "fast track"—and it just started a couple of days ago or last week when there was a discussion in Brussels about Ukraine submitting an application to the EU, everybody in Ukraine was in a positive mood. For us, it's about people in Europe understand that we are also Europeans, that they are willing to help us, and that very soon we are going to be a member of the EU. It was positive in many senses but first and foremost, in terms of the mood of the population and in terms of the attitude.

We were expecting this step and we are still expecting this step, which should be taken very seriously by Europeans. But, at the same time, when all these discussions started in Europe, which we observed here in Kyiv, one nation was saying "yes", "maybe yes", "maybe no", "a little bit longer", "everything will take longer", the regular people on the streets or under the grounds were saying "they promised, but they do not deliver. They will not deliver what they promise, and this is the usual way Europeans operate." At least that is what civilians in Ukraine are saying.

For us, if we are not [put] on a fast track to joining the EU it's going to be, I wouldn't even say a disaster, but it's going to be a complete delusion in terms of what we were expecting and what we finally got out of it. I just hope that Europeans understand that. And if they understand that logic, they have to act very quickly [because] at the same time, the question some people, even many people, in Ukraine are asking is why us, plus Moldova and Georgia? Why is the EU playing these games [with us]? Do they not want this [Ukraine joining the EU] to ever happen? Or are they [delaying] because they don't want to [admit us] very quickly on the fast track procedure? Why are they doing that?  So if doesn't happen almost immediately, then it's going to be an extremely powerful hit to the mood of my people, and I really don't want that.

You can even see in some of President Zelenskyy's speeches, he has said several times that in terms of NATO things are a little bit different, but we hope to become a member as fast as possible. As fast as possible doesn't mean a year. No way. If it's really going to be a yes, we don't care about all this EU traditional stuff. We would like to have it [membership] as soon as possible. This is the rumor of the mood in the office of the President as well. Everybody expects it should be [done] almost immediately.

What would [membership] mean for us, economically? It would mean that we are a part of Europe. We wouldn't have tariffs [applied to our exports]. We could attract investment from the European Union and other parts of the world. We would operate a normal business environment. Our legislation is completely, or very close to, or will be very soon, in line with the system in Europe. Then we would be able to grow. The life of our ordinary people would be better. All the stuff we would need to do here over a long period of time could be done very quickly, I mean everything that was a main obstacle [to joining] before. I'm talking about property rights protection, I am talking about court system [reform], I'm talking about the [time taken] to do business, I'm talking about [tackling] corruption, all of that stuff. We would be able to move this agenda forward very quickly and it would change the lives of ordinary Ukrainians.

Jacob Funk Kirkegaard:

Just to be clear, I mean certainly one of the most amazing positive surprises that we have seen in the last couple of weeks is the fighting capabilities of Ukraine's armed forces. What I just heard you say is that, coming out of this struggle, the EU members are going to see a similar, if you like, positive surprise on the ability of Ukraine to quickly adopt this long list of requirements that we all know EU membership will entail. So, EU members should not look at what has happened in the past, but basically what a change the current tragedy will do for the future. Is that Is that correct?

Oleg Ustenko:

Right. Absolutely correct. Exactly.

Jacob Funk Kirkegaard:

 Okay. I would now like to shift to something perhaps more concrete and specific. We've had a lot of efforts attempting basically to create instability in the Russian financial system. We've already talked about the blocking of central bank sanctions, we've had the disconnecting of several Russian banking institutions, etc, but I would I would actually like to ask you, since the war is happening right now in Ukraine, and Ukraine also has a financial system, could you talk to us a little bit about what you are doing to prevent people having to line up at the ATMs in the way that we have, for instance, seen in Moscow.

Oleg Ustenko:

You very rightly pointed out that in Russia, yes, all the sections are working and when I see these videos of huge lines for ATM machine somewhere in a Russian city, I am happy. In terms of the Ukrainian system, we are doing, I would say, okay under the current circumstances. Our fiscal reserves are at an okay level, something like $27.5 billion. Before the aggression, we had somewhere around $30 billion. The exchange rate is more or less stable. There is some depreciation pressure, but you know, overall, the situation is okay.

The hryvnia [Ukraine's currency], depreciated by between 5 to 7 percent depending on which time period you analyze, but let's say roughly around 5 percent. It's okay. In normal life, nothing more than just the fluctuation of the currency.

In terms of the policy of the National Bank, I understand that they did not increase the interest rate, which they were planning to do initially. So they kept it as it is and chose not to move anything.

In terms of the ATM machines, this is what you were asking, we had that kind of crisis during the first probably 48 hours [of the invasion] or before, but I never saw in Ukraine even at that time something like a huge line for an ATM machine.

In some cases, it's true, people were not able to use their credit cards to pay in the store, but it was for a very, very limited period of time. I would say hours probably, and that's it. So, people were asking for cash and they were not able to pay with cards. It's not because they [businesses] did not want to do that [take cards], but it's because the system was, as I understand, disconnected. There was a problem with the connections. That's why they were not able to use that.

Now, after the first 48 hours, the systems started to work properly. So, you can pay with your cards, debit or credit cards, everywhere in Ukraine, as it used to be the past. If you need cash, you can get cash, not even just at the ATM machine, supermarkets are now all working as an ATM machine. Basically, you could go and use your card and get cash if you really need it. You can withdraw the cash at the cashier in the supermarket in the store. It's okay.

Moreover, the messages we are seeing coming from the National Bank are asking people to use electronic money as much as possible, basically cards, rather than to use cash because then people are going to be safer. Keep in mind that it's not easy to physically get cash from here and move it to any region of the country. Even in those cities which are surrounded by the Russian army, by Russian fascists, they are able to use their cards to pay for products. From this point of view, it's okay.

In terms of budget, initially we were planning that the fiscal deficit was going to be 3.5% of GDP. Obviously, it will not be the case now. Thanks to international help we are able to fund our deficit. The good news is that we already cleared the deal, as I understand. I don't know whether it's already public information or not, but my understanding is that we already have new funds, or are going to have it very soon, from the IMF [International Monetary Fund]. We received money for gold, backfilled financial support from the EU. We have US Treasury guarantees of $1 billion, which was issued to us even before Russian aggressions. So, we are able to cover the deficit again because of our friends, otherwise it would be next to impossible, like in Russia, for example.

That's my actual lesson; it's so very important to have this ban on Russian oil and gas. We need to cut off these guys from the bloody money they are receiving now. Every day they're [receiving] $700 million from oil plus $400 million from gas—altogether more than $1 billion a day in blood money receipts. If we cut them off it is going to be a huge, huge, huge disaster to their budget, since the budget is [made up of] at least 40 percent [oil and gas] financing. If you have a 40 percent deficit, or even if it's lower because I assume that they will be able to sell to China—but then there is the question of what price China would be willing to give for that oil and gas and I assume that it's not going to be [the] international price and they will be lucky if China pays them half of the international price—but, at the same time, when you have that kind of deficit the only way they will be able to fund this deficit will be to print money. We all know what printing money will [lead to]. They will start with inflation, and I assume that inflation is heightened now in Russia, otherwise their central bank would not try a [higher] key interest rate. The key interest rate is already 20 percent, so we can assume that even now, they think that the lowest level of inflation is somewhere around 20 percent, but very soon it's going to be 100 percent or even more. In my view, their economy is going to be destroyed very, very soon, and the destruction of their economy means we will win.

Again, also in my view, we now have two fronts. The first front is on the ground in Ukraine, where our people are fighting against these Russian fascists, again, this monster which is killing our people. But the second front is the economic front. All these sanctions, they are working. We are destroying them economically, and destroying Russia economically maybe even has the same importance as the ground operation in our country. From this point of view, I'm happy that we are united, and I am happy that the US has this leading role. Of course we are going to have negative economic affects all over the world—including the United States—in the short-run, and in the medium-term there's going to be a correction, but in the long-run, we all will win because the world is going to be more civilized, because the world is going to be more secure, because businesses are going to be working in a safer environment. And that means that we are going to banish it after the monster is destroyed.

Jacob Funk Kirkegaard:

Thank you again, Oleg, for that comprehensive answer.

One other very concrete thing that I think many people around the world worry about, and I'm sure many, many people in Ukraine also are concerned, concerns the general energy situation in Ukraine. We have obviously heard a lot about energy sanctions already, but, as you know, Ukraine also has an economy, it's fighting a war, and you are a country that, at least pre-war, relied on nuclear power for about 50 percent of your energy.

Unfortunately, we have seen how nuclear power plants have become a target by Russian forces. So I was wondering if you could you could comment on the domestic energy situation and literally, how you keep the wheels running in Ukraine at the moment. Even if there is, I suppose, one positive aspect which is that we know that the Ukrainian electricity grid will soon be connected to the EU grid and will no longer, therefore, be as dependent on Russia, how do you keep the energy wheels spinning in Ukraine, while the war's going on?

Oleg Ustenko:

Look, this is definitely not my area of expertise, but what I can tell you and what I hear is that the decision that we are going to be disconnected in all possible ways from Russia has already been taken. No gas. No oil. Nothing from Russia at all. Complete embargo on everything made in Russia.  

In terms of our nuclear stations, a couple of days before the aggression, there was a meeting in the office of the president where we all heard that 15 reactors and power stations were in use. Our policy, even at that time, was to disconnect from Russia as much as possible and to be connected to the European system. My understanding from what I heard from the minister for energy is that this is the general direction for the system.

I could not really comment more on that, except that you know all these terrible things where Russians are [inaudible] keeping their cycle around the station. Even for me it's hard to comment on what they would like from that there, because you have a monkey with a bomb in its hands. You never know what the monkey is going to do with that nuclear station and you are absolutely right, it is an extremely challenging situation in many ways, including nuclear safety. It's another reason to stop the war as soon as possible, and again, without great support from the United States plus the allies of the United States and Ukraine and Europe, it would be next to impossible. These are the times where we have to be united, altogether united, otherwise the world will be completely different [to the world we knew] even three weeks ago.

Jacob Funk Kirkegaard:

Well, thank you Oleg, again. I would like to shift now to asking some of the questions from our audience, or even more questions from our audience, so if some of you have additional questions for Oleg, please utilize the email link that you have been given.

I've got a couple of questions here. We've already talked about what your priorities for financial help will be, but there's a number of specific questions here concerning the recent $14 billion package passed by the House of Representatives. If you could speak to, you know the nonmilitary part of your priorities, the financial and, if you like, civilian aid, what would you like to have in that package on financial and civilian aid?

Oleg Ustenko:

One more time, the most important [thing] for us, the really crucial [thing] for us is not on the civilian side. It is to have military equipment. Military equipment is everything for us. It's the most important side. All the rest is also very important, but not the most [important] priority. Weapons and ammunition for our army and our military people, this is the [greatest] priority without any doubt.

In terms of civilians, what we really need, is to support people who have moved of the country. They have to have a source of income and they are not able to work, so we have to support them. [That package] partly might be used as a transfer to those people who are temporarily refugees all over the world, first of all, in countries that are in Europe and close to us, Poland for example, and other countries in Europe where our people are.

The statistics we have so far are shocking. Something like 2.2 million of our people are already abroad. They crossed the border and they are somewhere in Europe. These people don't have a source of income, so we can use this money to support these people.

People who are here in Ukraine and who have moved from big cities or from the territories which were under attack by Russian fascists, they also don't have a source of income. It's difficult for them to survive. Obviously, other Ukrainians are helping as much as they can. You can find free housing and you can find some free food, but how long will it last? Plus, we are talking about normal, ordinary Ukrainians hosting temporarily [displaced] people. They don't have enough income under the circumstances to even support their own families, but at the same time, they are willing to support those who moved into their houses, who they are hosting so kindly in their houses. Maybe we could use part of this money to support Ukrainians.

It's not difficult to do. We have this ETF system in Ukraine, so everybody on their cell phone will have so called "Diia" [application] where you can get old messages from the government. We already tried this system when we sent some money to Ukrainians after they had their COVID vaccination, so we know how to use the system. I guess that in this sense it would work properly for all Ukrainians, all over the world, not even only those that are still in Ukraine, but all those who are refugees. So that's also a way that [the package] can be used.

Another way of using this money is to send us food. We need food, we need clothes. We need everything to cover Ukrainians' basic needs. As I said, $100 billion in assets have been destroyed already. People can move back to their houses if their houses aren't destroyed, but then you still have to support these people for some period of time and having this fund to support Ukrainians with, I don't know, $20, $40, $50 a day, would be something and would be highly appreciated by Ukrainians. They have to understand that there are people, not only in the country, but internationally and in the United States in particular, who are thinking about their daily lives. This is very symbolic. This is a signal that says you are not alone in this world, you have some very powerful world players who are supporting you and this powerful international coalition is led now by the United States, and I think that the United States has a huge role there.

Jacob Funk Kirkegaard:

Thank you, Oleg. I got a number of questions about how you and your colleagues in Kyiv view the economic role of China in your confrontation with Russia. One thing, of course, is that the sanctions that we've been talking about are not really Western sanctions, right, they are really at least G7, plus other advanced economies in Asia have joined. The only truly important, if you like, trading partner of Russia that hasn't joined is China. How do you view China's economic role in this conflict from Kyiv?

Oleg Ustenko:

We are discussing this issue day and night in Ukraine and even this morning when we were discussing China and Russia and the possibility to use China and what China role is in this situation, I would say that I have a very strong view that the only country who really benefits now from armed conflict and war in Ukraine is China. China will have a much weaker Russia next to her. China will benefit from oil, which it will be able to buy from Russia in the future. China, this is what we were discussing this morning, might be a connector between Russia and the rest of the rest of the world.

I would have to believe that the Russians are, within the next years, going to move forward any agenda that they will have, assuming that our war is stopped. The only communicator for them is going to be China. China definitely has benefits, out of all this terrible, monstrous stuff which we are experiencing now. But, at the same time, it's hard for me to comment on the geopolitical [goals] of China. Do we really believe that we can use China in the peace process? Do we really trust China? Do we really believe that that the Russians are going to be open in front of China? Later on they will be, because they will not have any other choice, but China is definitely an important player now and China is trying to distance [itself] from all that stuff, [but] it doesn't mean that somebody in Beijing isn't feeling happy about a weaker Russia now. Plus, still remember that China will be happy to make a list of some [inaudible] for Russia and it's marketable in Russia as well.

Even now, when I was watching what they're doing now in Russia, you can see different media [outlets], many of them are kind of propaganda videos, but you can [watch] the private channels and bigger channels in Russia and they're showing some videos that say "now we have only one great friend and this great friend is China." So they're starting to talk about China. I mean ordinary people. But I assume that nothing random happens in Russia, so this is directed by somebody within Russia.

Another set of videos you can see now in Russia are become more and more and more aggressive. Over the last, I would say two or three days, I saw videos of Russians, a big Russian animal, talking about "okay, remember the last time we were in Berlin, we were in Paris, we were in Vienna, we have to do the same now, but this time it's going to be different from last time. This time we will go directly to Berlin, and to Paris, and to some of the other European cities and we will stay there, we will not come back to Russia."

These two different discussions they are having in Russia now, in terms of geopolitical stuff, this is what they're trying to put into the brains of their ordinary people. For me it's a signal. It's a signal on both sides, in terms of China and in terms of their willingness to move forward [through Europe] if Ukrainians are not able to win. [inaudible] I am very much sure that we are already winning, but this is the logic which somebody with enough competence with that kind of stuff should be giving us his view or her view in terms of that kind of situation which is characterizing Russians.

Jacob Funk Kirkegaard:

Well, thank you very much, Oleg. We have reached our one hour witching hour and again on behalf of the Peterson Institute and our audience, I would like to thank you very, very much for being with us for this hour and sharing your views and expertise on what's going on in Ukraine, and I hope by hosting you here we have been a helping hand in your efforts. And we look very much forward to having you visit us again, online or in person, as a representative of a free Ukraine. So once again, Oleg, thank you very much.

Oleg Ustenko:

Thank you very much, and thank you very much for attending. [inaudible]. Thank you, thank you, I appreciate that very much.

Jacob Funk Kirkegaard:

 Meeting adjourned.