INFLATION. INSTITUTIONAL CORRUPTION. High unemployment. These are just several of the many challenges facing Ukraine, which recently placed fourth in Bloomberg’s so-called misery index of 51 troubled world economies. Natalie Jaresko MPP 1989 wants her country to lose the dubious distinction of even appearing on this list—and she, more than maybe anyone, is in a position to make that happen. As the minister of finance for Ukraine, this HKS alumna finds herself in perhaps one of the most difficult jobs in the world: righting the economy of a young, post-revolutionary nation while it is involved in a bitter and bloody territorial conflict with secessionist forces and its neighbor Russia.

With an inflation rate expected to rise to 17.5 percent in 2015, unemployment predicted to climb to 9.5 percent, and a GDP of only $3,082 per person, Ukraine has a formidable path ahead. But Jaresko doesn’t let these statistics get her down. “I wouldn’t have taken the job if I weren’t optimistic about Ukraine’s future,” she told HKS Magazine.
 

A challenging environment

“Optimistic” is not the first word that comes to most observers as they ponder the status of Ukraine. Located at a key strategic point between Russia to the east and the European Union to the west, Ukraine has deep ties to both but a desire, as Jaresko puts it, to “fulfill its European destiny.” This aspiration is complicated by Ukraine’s close economic ties with Russia—its top trade partner—and the fact that 17 percent of Ukraine’s population is ethnically Russian.

The tension between Ukrainians who prefer to align with Russia and those who believe that Europe represents the country’s future began to escalate in 2013, when then Ukrainian President Viktor Yanukovych repudiated an association agreement with the European Union and instead sought to strengthen his country’s relationship with Russia. This decision led to the Euromaidan (“Euro Square”) protests in several Ukrainian cities and to the ousting of Yanukovych following a special election in May 2014.

The protests did not sit well with some people in Ukraine’s primarily Russian-speaking south and east—or, unsurprisingly, with Russia, which promptly moved troops into the Crimean Peninsula, taking control of the region. At about the same time, local militias, supported by Russian troops, seized government buildings in the eastern cities of Donetsk and Luhansk.

Approximately 12,000 Russian troops are occupying parts of Ukraine, according to the U.S. government. In addition, Russia has not only closed Ukrainian banks in Crimea, replacing them with a Russian subsidiary, but also appropriated several public and private enterprises, including real estate and media outlets. According to local estimates, more than $1 billion in assets have been seized by Russia in the peninsula. This figure doesn’t capture the human cost of the conflict: More than 6,000 people have died, tens of thousands have been wounded, and more than a million have been displaced to other parts of Ukraine or to Russia.
 

The American perspective

These were the circumstances when Jaresko became Ukraine’s 15th finance minister since the country gained independence from the Soviet Union, in 1991. Sworn in on December 2, 2014, she brings an unusual perspective to her role: The daughter of Ukrainian immigrants, Jaresko is an American who was raised in the Chicago area. Both her parents came to the United States as children after World War II. Her father, who was born in central Ukraine during one of the Stalin-induced famines, ended up in a displaced persons camp in Germany before emigrating to America. Her mother was born in Germany because her grandmother had been taken there by the Nazis during the occupation of Ukraine. They, too, found themselves in a displaced persons camp and moved to Chicago after the war. Jaresko’s parents met in the city’s tightknit Ukrainian immigrant community.

Jaresko grew up with a profound sense of gratitude for the opportunities America had provided her family. “I was raised in a very spiritual family, a family that was extraordinarily grateful for what the United States enabled them to have,” she says. “They came to America with nothing and were able to build a normal, middle class life.” Her father even served in the U.S. military during the Korean War.

Jaresko attended DePaul University, which at the time was primarily a blue-collar commuter college with strong connections to Chicago’s various immigrant communities. After receiving her degree in accounting and political science, she applied to the Kennedy School. “I believed in the greatness of democracy and public leadership,” she says. “I had read about Lincoln and Kennedy as a child, and public service was something I felt a strong pull toward as a grateful first-generation immigrant.” She arrived at Harvard Kennedy School both intimidated and inspired: “I was fearful that I couldn’t step up. But I felt very strongly about JFK’s call to service.”

Jaresko shakes hands with U.S. Treasury Secretary Jacob Lew after their talks in Kiev in January 2015

Kennedy School lessons

The lessons she learned at the Kennedy School remain invaluable. “The entire curriculum influenced me,” Jaresko says. “I find it more and more useful every day. First, I learned facts about things like international trade policy, which allow me to understand critical issues and apply theory in a very real world. Second, the reality is that policymaking isn’t just about facts but about your ability to convince others of your perspective—the ability to find solutions when there are enormous shades of gray.”

Jaresko notes that Ukraine is a post-revolutionary society in the ninth quarter of a recession during wartime. “Our nation is facing many more challenges than most countries, and it’s critical that we reach agreement on the very difficult reforms that are absolutely necessary. The Kennedy School helped me craft my approach. I even use the HKS rule within my ministry, the one-page rule—that my staff needs to be able to describe their subject in one page.”

About her HKS curriculum, she says, “Everything was built from a practical perspective and is a very useful contribution to how I think.” In particular, she cites as key influencers the former faculty members Richard Haass and Edith Stokey and the current Douglas Dillon Professor of Government and director of the Belfer Center, Graham Allison.

“I was lucky—I did my PAE [policy analysis exercise] with [then-lecturer] Richard Haass and my client was John Herbst, who in 2003 became the U.S. ambassador to Ukraine,” she says. Her PAE, titled “The Soviet Union and the General Agreement on Tariffs and Trade,” led her to work with Robert Zoellick MPP 1981 at the State Department’s presidential management desk of economic affairs. When the Soviet Union fell apart, in 1991, Zoellick asked if she wanted to work at the U.S. embassy in Ukraine. She jumped at the chance.

Jaresko eventually left diplomatic life for the private sector, serving as president and CEO of the U.S.-sponsored Western NIS Enterprise Fund, where she invested millions of dollars in Ukrainian small businesses. After Ukraine’s Orange Revolution in the mid-2000s, she cofounded Horizon Capital, raising money for Ukrainian businesses from American and European investors.
 

Asking what she can do

Jaresko—who, with a monthly salary equivalent to $250, is essentially volunteering her time as minister—will need to maintain her hopefulness as the country claws its way out of dire economic straits.

But some observers—including Nicholas Burns, Goodman Professor of Diplomacy and International Relations at the Kennedy School, who has known Jaresko since their time at the U.S. State Department working on Eastern Europe’s economic development after the fall of the Berlin Wall and describes her as a friend—believe Jaresko is the right choice.

“She couldn’t have entered there at a more difficult time, but I think she’s the perfect person,” says Burns. “She really does understand the global economy and she really understands the huge challenges ahead for Ukraine.”

Those challenges are indeed enormous.

“We experienced 23 years of communism, a regime that borrowed $40 billion that we cannot afford to pay back, and the Ukrainian people are demanding reform,” Jaresko says. “I’m discussing with international creditors arrangements to deal with medium-term debt and to achieve banking stability. Then we can rebuild the investment climate and reach economic growth in 2016.”

Jaresko says she believes in the strength of the Ukrainian people. “We never give up, even against one of the largest nuclear powers. We’ve prevented Russia from taking any more territory. And every day, people are volunteering at hospitals, providing housing, and volunteering to fight in the war. This gives us optimism.”

Through it all, Jaresko is thankful for her Kennedy School network. “I have many friends who’ve been very supportive. It is important that the HKS community, which is so influential, has a good sense of what’s happening in Ukraine. We are fighting for the freedoms that many people take for granted and are defending global principles of freedom and sovereignty.”

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