Knowledge@Wharton. Crisis in Ukraine: "The Window of Opportunity Is Very Short"
Events in Ukraine are moving so swiftly these days that it is hard to keep up with the latest developments. On Sunday, Crimea voted to secede from Ukraine and rejoin Russia; on Monday, the U.S. and Europe imposed sanctions on several prominent Russians and Ukrainians; and on Tuesday, Russian President Vladimir Putin announced plans to make Crimea a part of the Russian Federation. A diplomatic resolution to the protests that began last fall against former Ukrainian President Viktor Yanukovych seems ever more elusive.
Against this backdrop, Knowledge@Wharton asked Sophia Opatska, CEO of Lviv Business School in Lviv, Ukraine, for her analysis of what led up to the current crisis and what lies ahead for a country now divided.
An edited transcript of the conversation follows.
Knowledge@Wharton: We’re here today with Sophia Opatska, CEO of Lviv Business School, in Ukraine. Sophia, yesterday, 97% of the voters in Crimea decided they wanted to secede from Ukraine and be annexed by Russia. What do you make of this?
Opatska: I don’t think that people [around] the world believe that 97% [number]. Given the current conditions in Crimea and the pressure [surrounding] the vote on Sunday and the two weeks before it, I don’t think that this [election represents] the real world. I’m not sure that people in Crimea — even many of those who think that it’s going to be better with Russia – are aware of all the facts.
Knowledge@Wharton: What do you think Russian President Vladimir Putin has on his agenda? He’s going to talk to both houses of Parliament tomorrow. What is he going to tell them?
Opatska: There might be a difference between what he’s going to tell them and what’s on his agenda. I don’t know what he’s going [to say], but speaking about the agenda, I think that he did not really like what was happening in Ukraine over the last months. I think the plan was to have some kind of unity between [several] countries, like Russia, Kazakhstan, Belarus and Ukraine, economically. But also, I think that [plan] was very much about political influence because it was related not to real democracy but to dictatorship, the absence of free media and human rights violations. So, the whole protest which took place in Ukraine was really against those things. But also, against corruption, which all of us know [occurs] not only in Ukraine, but in Russia. Maybe in a [slightly] different version, but it still happens there. So, I think Putin does not really like what happened in Ukraine, and this is his opportunity to take care that those processes do not happen in Russia.
Knowledge@Wharton: What do you think [last Sunday’s vote] will mean for Ukraine, going forward?
Opatska: I think Ukraine, no matter what happens with Crimea, needs to do very important economic reforms, and reforms overall — reforms in rule of law and administrative reforms. People were not really doing that for 23 years. One of the reasons why people in Crimea would like to go with Russia is because they did not find economic wealth in Ukraine. They are looking for different opportunities. If, economically, Ukraine were doing things differently, [secession] would not be an issue at all.
No matter what happens with Crimea, I think it’s very difficult for many people emotionally – you know, to keep working and focusing on reforms. But this is definitely what we need to do in the short term. Because the window of opportunity for Ukraine is very short right now. We have to take this moment.
Knowledge@Wharton: What do you think that the new government in Kiev ought to do in response to Putin’s actions?
Opatska: It’s very important that we do not allow the same things in other eastern oblast [administrative division] regions in Ukraine. There are some people brought in from Russia waving Russian flags and trying to destabilize the situation. It’s very important right now to have a stable situation. We as a country still look for some diplomatic solutions. In that sense, I think our new government did a great job working with international peers.
Knowledge@Wharton: Beyond the politics, what are the economic advantages of Ukraine aligning with Europe, as opposed to Russia?
Opatska: There were a lot of discussions about what Ukraine will gain with Europe, what Ukraine will lose with Europe. Maybe for some industries, it’s not very [advantageous] to go with Europe. I think the major issue for Ukrainians is that going with Europe should create a different system of management in the country. It was, for us, [a question of] how we can become a more transparent country, how the rule of law can start working, so that people don’t have to go to the court and bribe [an official to issue the decision they want].
And for us – we have a lot of questions about Europe as well. It’s not that we support their way of life 100%. We have some differences in values. And in some sense, we would like to [stay with] some of the things we do in Ukraine. But still, the most important [issue] is how the system is run in the country. And again, I understand that some industries might lose. But I’m sure that those are not knowledge-based industries. Those are most probably industries from the last century or last two centuries, which we need to reform anyway. I know it’s not going to be easy. And in the short term, we might lose. But the question is, would you like to win in the short term or in the long term?
Knowledge@Wharton: In Moscow today, according to press reports, these sanctions that the U.S. government imposed today were met basically with derision and mockery. In fact, the Russian stock market went up. Assuming that everyone, both sides, want a diplomatic resolution – no one’s interested in a military one – what types of sanctions could the U.S. and EU impose that would be effective but not drive both sides into deeper disagreement?
Opatska: I think you have posed the question in a very right way, assuming the two sides would like a diplomatic resolution. Unfortunately, we don’t really see that the other side would like to have this diplomatic resolution. There is even more and more pressure now not to resolve it diplomatically. But if I were to answer the question of how the situation can be influenced outside of Ukraine, I think it would have to [involve] energy issues. Russia is selling oil, selling gas; it’s one of the major sources of income for the country. So, I think if there was a way somehow to influence [the situation], it would be [through] the energy sector.
Knowledge@Wharton: What do you think is going to happen to the minorities in Crimea? The people who did not want to rejoin Russia?
Opatska: Thank you very much for this question because, unfortunately, very often this question is not asked about other minorities, which are not the Russian minority in Crimea. In reality, while Russians have the majority – about 50% of the population in Crimea is Russian – they were not ethnically settled there. Ethnically, they were Crimean Tatars, who make up about 20%. They were deported by Stalin. And then 23 years ago, when Ukraine gained independence, they got the chance to come back to Crimea. There are also Ukrainians there, who make up another 20%. And then there are about 10% of other ethnic groups — Greeks, Armenians, Georgians, a very big mix of people.
It’s very important right now to have a stable situation. We as a country still look for some diplomatic solutions. In that sense, I think our new government did a great job working with international peers.
What will happen to them? Neither Tatars nor Ukrainians, nor many other minorities who live in Crimea, accept the results of the referendum or of the whole situation itself. So, unfortunately, we will have very many refugees. In my opinion, Crimea will become a kind of silent war, which can last for a very long time. It means there is now war, but [also it means that] nothing happens. No tourists, no infrastructure development. It [remains] just frozen the way it is.
So, most probably a lot of refugees will move to mainland Ukraine. I know that western Ukraine already gets a lot of refugees, especially Crimean Tatars. There were a lot of pictures already from Crimea, which are quite offensive to Crimean Tatars. I think that in reality, one of the major reasons why Ukraine is so focused on this situation in Crimea — and tries to keep Crimea [under] Ukrainian sovereignty — is because of not only Ukrainians, but also of Crimean Tatars, who don’t have another land to live in.
Knowledge@Wharton: Could you explain a little bit what the impact of the agitation in Ukraine has been on the Lviv Business School? How has it affected you, and what do you think is going to happen going forward?
Opatska: Our university, the Ukrainian Catholic University, has always been in a very pro-Western position in the education [area]. So, for this reason, we had quite a lot of difficulties with the former minister of education, who was very pro-Russian and who was putting a lot of pressure on our institution. He was trying to control the universities as much as possible.
Knowledge@Wharton: In what sort of ways was that control exercised?
Opatska: Well, for example, we are a completely private institution, and we don’t get a penny from the state. But in a way, still, we get a lot of rules, a lot from the Ministry of Education. They provide accreditation. For example, it’s not the independent body or association providing accreditation to the universities; it is the Ministry of Education. So, you have to go for a license there. You have to go for accreditation. The books have to be under the signature of the Minister of Education. Plus, there was huge corruption in the Ministry of Education. For example, all institutions had to put in a database system, and they had to buy it from some relative of the Ministry of Education.
The whole system is very corrupt and very interdependent. Our institution was saying that institutional standards should be according to best practices in Western countries. And of course, this was not liked very much. So, from the very first day for students and for the faculty, [there was no] choice about what we should do. I think a lot of things were run by students. A lot of initiatives were run by students. Administration and faculty members were always supportive.
A lot of people as individuals participated in the protests. Yes, we have somehow to change the way we are working…. Sometimes we are doing some social things, which are not directly related to our work. But at the same time, I think one of the important rules which we have right now is to build a community.
The university and the business school itself have a very high level of trust from the business community and the community overall. And it’s not only about Lviv; it’s about Kiev as well. It was always a very transparent institution. This level of trust which we have — we could see it in the very different initiatives which we started and how they were supported. People like to come for our events. No, the time is not easy. But they like to come to see how other people think, what they think, to discuss, just to be together.
Knowledge@Wharton: What is the outlook for U.S. and European companies who do business in Ukraine, or want to do business in Ukraine? What can they look forward to in the next year?
Opatska: The last years were quite difficult. We were not getting investments in Ukraine, for the same reasons. You cannot plan long term. You have to deal with a lot of bureaucratic issues. So, one of the very important reforms which we need to do is deregulate. We need to create an environment for innovation and entrepreneurship. And this is one of the first initiatives which our Ministry of Economics is right now focusing on. Also, from our business school, a lot of alumni are involved in the regional products of deregulation, so that business people are telling, from the business side, how this reform should be done, the way that they can run businesses in a transparent way but also so that it is not controlled completely by government.
In a way, international companies were in a better situation, because many Ukrainian companies had an additional challenge. They didn’t have a very good environment for doing business. And if you were doing business, it could have been taken away. Companies were offered an amount of money, and either you sell for this amount of money, which is half the price of the company, or you lose it. There was a lot of pressure on Ukrainian companies as well.
I think one thing which every Ukrainian should promise to himself or to herself is that it cannot be the way it was four months ago.
Knowledge@Wharton: Three months ago, could you ever have anticipated where you would be, and how far you would have come? And is the euphoria that you all must have felt several weeks ago, a month ago, is that sustainable? Is that still there? Is there still a sense that things will move forward and get better?
Opatska: If you had asked me in October, “Is it possible that people in this country … would be able to get out in the streets?” I would have said, “No. Definitely no…”
But euphoria? I don’t think we had euphoria. I mean, we were happy that it was almost ended, though now we see that it did not end. But because so many people were lost, because so many people died — and those people were among us — it was very difficult emotionally. And because of that, I think right now we cannot give up. We just cannot give up. Every time we remember how many people lost their lives, we think, “Was it worth doing that?” So, we have to be different. You know, I think one thing which every Ukrainian should promise to himself or to herself is that it cannot be the way it was four months ago. I have to do whatever I can do at my pace. It’s my obligation. It’s not the obligation or responsibility of the president of the country. It’s not the responsibility of the prime minister or the cabinet of ministers. It’s the responsibility of every single Ukrainian, every citizen of Ukraine, to do something to change this country. Otherwise, it was not worth that.
Knowledge@Wharton: Based on the experience of the past few months, what lessons in leadership do you think you have learned that you may not have learned before?
Opatska: It’s very interesting, because during the last three for four months, people were always looking for some leader. But maybe because our opposition leaders were a little bit indecisive, we saw another way of leadership. We saw an opportunity for every person to take a leading role. So, due to that, due to self-organizations, so many new, interesting initiatives evolved. And people were supporting them. It is still continuing because again, we realize that it’s not any more a job only of the government. People [as well] must take the initiative.
Just to give you an example: Right now, we need to have a lot of new faces in public service, in public administration. We realize that we need a lot of young people going in there and changing the system. So, we as a school got the request to start some programs in public administration — something we had not been thinking about a month ago. Right now, when we say that we would like to start a three-month modular program in one month – you know, it looks a little bit unrealistic. But at the same time, if not us, then who? We just have to respond to the need. I think that’s what people learn to do. That’s one [kind] of leadership.
I think another understanding of leadership is that it’s about all of us as human beings. We started to communicate. Before this event, people were living in their small silos. You know, business people communicating with business people, church with church, NGOs with NGOs – all according to social statuses. All those silos were maybe meeting, but not talking too much. People were perceived very much by social position or their professional position.
I think what happened at Maidan, people did not really know who was there. There were very rich people, people who are retired, people who have their companies or who don’t have their companies, who do different professions. And you did not really care who they are. We were just grateful that they are supporting all of that and that they have the same values. People were talking to each other about important things, no matter which social or professional status they had. So, we started to notice each other as human beings. I think that’s the major shift in our society.
Knowledge@Wharton: Thank you so much for joining us. We’ll look forward to following what happens.
Opatska: Thank you very much. And I hope it will go in positive ways.