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Ukraine’s corrupt counter-revolution

In Ukraine, revolution and reform has given way to reaction, with vested interests entrenching themselves even further. Русский

 

Right-wing activists are shrouded in smoke from flares during a rally to mark the third anniversary of the Maidan protests. (c) AP Photo / Efrem Lukatsky. All rights reserved.Last week, as the world prepared for the Christmas holidays, Ukrainian MPs gathered in parliament at 10am, and departed 20 hours later. This legislative marathon happens every year, when, in a regime of secrecy and sleeplessness, Ukraine’s parliamentarians pass the budget for Europe’s biggest country. After all, when else can you carve up assets in a country that has seen the overthrow of an authoritarian president, a revolution and occupation by Russian forces?

For the past three years, parliamentary deputies, unashamed of television cameras, surround the country’s prime minister in the chamber as they trade for benefits and state contracts. Take Oleh Lyashko’s Radical Party. Since 2014, this party, known for its populist rhetoric, has managed to triple the level of state support for a company that builds fire engines. In 2017, direct state financing of the company in question (which, of course, belongs to members of Lyashko’s party) will reach $25m. The Radical Party, meanwhile, positions itself as an opposition platform, yet still votes for the state budget from year to year.

Corruption remains Ukraine’s biggest problem. According to polls conducted in December 2016, 89% of the country’s population considers the current government’s battle against corruption to be a failure. As Petro Poroshenko reaches the halfway mark of his first term as president, these figures don’t bode well.

Ukraine’s “de-oligarchisation” programme, announced in the spring of 2015, ended in a deal with members of the club

President Poroshenko has spent the past two years in a constant conflict of interests — and one that he is yet to solve. Who is he – a politician or a businessman? Politics can’t be made according to the rules of the confectionary business, which appears to be merely the surface of the current president’s activities. 

Ukraine’s “de-oligarchisation” programme, announced in the spring of 2015, ended in a deal with members of the club, and Poroshenko’s battle against the clans has led to the opposite — he’s begun to build his own instead. The president has not purged the ranks of his entourage, but placed those members of his team facing accusations of corruption in positions of power and influence. 

Ukrainian politics means business. CC-by-3.0: NBU / Flickr. Some rights reserved.Indeed, at the start of 2016, economy miniser Aivaras Abromavičius caused a scandal when he revealed that Igor Kononenko, the president’s closest associate and a member of parliament, was influencing government decisions. By the end of the year, the name Kononenko has come to feature more and more in investigations by journalists, thus damaging the public’s trust in Ukraine’s president.

This has now turned into a new scandal, and one in which Poroshenko faces accusations of corruption himself. These accusations are made by Alexander Onishchenko, a former associate of the president who’s now playing the role of Ukraine’s Boris Berezovsky. Onishchenko alleges that Poroshenko asked him to bribe MPs when votes in parliament were being bought wholesale. According to Onishchenko’s statements, he was also meant to pass a kickback to Kononenko for coal and gas delivered to state energy enterprises. Onishchenko was also allegedly involved in a potential deal in 2015 to buy the 112 television channel, which is connected to Yanukovych-era forces and critical of the current authorities. 

Having fled abroad to the UK and now Germany, Onischenko has given testimony on a deal between the president and Nikolai Zlochevsky, a Yanukovych-era ecology minister and ally of the ex-president, to the National Anti-Corruption Bureau of Ukraine (NABU). When news of this broke in Kiev, Igor Kononenko quickly flew to Vienna, where journalists photographed him together with Zlochevsky in a restaurant. 

Reforms in Ukraine are on the move, but the tempo of progress isn’t satisfactory for most Ukrainian citizens

Poroshenko is now trying to smooth over the scandal provoked by Onishchenko, and apparently block further publication of the accusations. Interviews with Onishchenko taken by journalists, for example, have not aired on Ukrainian television. This topic now being muffled intentionally in the media, which naturally provokes discussion of censorship. This is particularly the case given the authorities’ investigations into the private television channel run by Savik Shuster. Shuster, a former RFE/RL journalist who moved to Ukraine ten years ago, has now had to close the channel, which is known for its criticism of the authorities. 

Reforms in Ukraine are on the move, but the tempo of progress isn’t satisfactory for most Ukrainian citizens. Instead of principles, deals dominate Ukraine’s politics. And many of the achievements of the reform process are the result of building coalitions, often between civil society, the few reformers in parliament and government, independent journalists and international donors, who have made a direct link between their assistance and the battle against corruption.

Today, we can see evidence of Ukraine’s counter-revolution of corruption on six levels:

  1. Avoiding transparency. Over the past year, the authorities have tried to block legislation on electronic declarations for public officials’ assets. First, they tried to postpone it with the 2016 budget. Then a law was passed revoking criminal liability for false declarations. In the end, members of the security services under the control of the president refused to register the declaration system. As a result, the electronic declaration system worked, but only under direct pressure from the European Union, whose representatives stated that, without the declaration system, there would be no visa-free regime with Ukraine.
  2. The conflict between the new anti-corruption bureau and the old corrupt agencies. Everyone has ganged up on NABU: Ukraine’s general prosecutor, who has closed access to the database of criminal investigations; the security services, who have punished an NABU employee for reading a lecture; and now Ukraine’s special anti-corruption prosecution office, which is blocking important investigations by NABU.
  3. Stacking state enterprises en masse with the president’s friends. Here, the president’s allies make money via corruption schemes at the Odessa Port Plant and the Tsentrenergo energy company. In effect, the desire to enrich oneself has blocked privatisation of these state assets. And open hiring processes for management positions at these enterprises have turned out to be fiction — the authorities have blocked the hiring of new CEOs through the courts.
  4. Dividing up the assets of Yanukovych allies. Take Sergei Kurchenko’s oil assets, for instance — tonnes of refined oil, instead of being confiscated for the benefit of the state budget, were taken over and sold by an ally of Sergei Pashinsky, the head of the presidential administration after Yanukovych fled in 2014. The money was then deposited in a bank under that individual’s own name. A similar scheme was used to change the ownership of oil assets, including a set of petrol stations, belonging to Rosneft.
  5. The continuation of old agreements between Ukraine’s oligarchs. These relationships allow Dmitry Firtash to continue to get rich off state networks of regional gas operators, Igor Kolomoisky – to avoid paying off the debts his Ukrneft oil company owes the state, and Rinat Akhmetov – to make money on the “Rotterdam plus shipping” scheme, which sets the tariff price of coal for power stations on the basis that this fuel was supposedly bought on the Dutch market, rather than Ukrainian mines, and then delivered to Ukraine.
  6. Finally, the most cynical part. Ukraine’s current authorities are trying to negotiate with oligarchs or Yanukovych allies on ways to work with one another. For instance, an investment firm close to president Poroshenko has been buying securities and debts belonging to Akhmetov’s DTEK company for some time. Since the start of 2016, the rates on these securities have risen several times over, and this has happened thanks to decisions taken by Ukraine’s national energy regulator, which is run by a former manager of Poroshenko’s Roshen company. Many people have seen the recent nationalisation of Kolomoisky’s PrivatBank in a similar light — as a deal between the oligarch and the president. Accused of removing money from the bank, Kolomoisky has to return significant funds or give the president some “loyal” coverage on 1+1, his television channel. 

These strands of Ukraine’s “corruption consensus” continue against the background of foreign reformers leaving Ukrainian politics. 

Over the past year, finance minister Natalie Jaresko and economy minister Aivaras Abromavičius have both left. Georgia’s David Sakvarelidze and Khatia Dekanoidze, responsible for reforming Ukraine’s law enforcement structures, have also been forced out. Mikhail Saakashvili, Odessa’s regional governor, wrote a resignation letter in which he accused the president of corruption. Gizo Uglava, the last remaining specialist from Georgia, is still the first deputy of the NABU, but he’s also under pressure — in 2016, the authorities tried to remove his Ukrainian citizenship at the request of the presidential administration.

The reform process is being wound up, and Ukraine needs the support of the west like never before

This year, Ukraine’s anti-corruption crusaders, including myself, have come under unprecedented attack by the kleptocrats, who are using the police, judges, security services and internet bots to settle scores. These are people for whom honesty is to set up deals between their own shell companies and state enterprises after they come to power. For whom morality is to shed a tear on the Avenue of the Heavenly Hundred, and then 50 metres later discuss a new scheme for the Odessa Port Plant or Tsentrenergo. For whom ambition means becoming Ukraine’s number one oligarch, not a reformer president. 

Ukraine’s presidential elections are due to start in 18 months. And this means the space for reform is shrinking, and professionalism will be substituted by populism in the corridors of power. The reform process is being wound up, and Ukraine needs the support of the west like never before. The government in Kiev is still dependent on the support of the IMF, the macro-financial support of the EU and the US. This is why every dollar or euro sent to Ukraine should be matched not only by a report on laws passed, but also their successful implementation. 

The example set by the law on e-declarations, which has now launched, has revealed huge amounts of cash undeclared by Ukraine’s politicians, but hasn’t yet led to any real consequences. The attacks on the National Anti-Corruption Bureau should be stopped, and the political persecution of anti-corruption activists should carry consequences, even to the point of sanctions on representatives of the ruling elite, which is mired in kleptocracy.

If this fails to happen, we could see a repeat of the Moldova scenario in Ukraine, the resurgence of pro-Russian forces and the final blow to the hopes of the millions who, three years ago, made their belief in democratic values public.

 


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