A multidimensional approach to corruption in Ukraine is needed

Western views of corruption in Ukraine often ignore progress since the 2014 Euromaidan revolution, typically holding the president responsible and accusing him of being in cahoots with corrupt oligarchs.

Such claims are wrong. Responsibility for tackling corruption in Ukraine is shared by the president, parliament, Ukrainian citizens and European governments.

Ukraine is not a presidential republic but a parliamentary democracy. Placing responsibility for everything on President Petro Poroshenko wrongly assumes Ukraine has the type of kleptocratic political system that is commonplace in Russia and Eurasia. Ukraine, Georgia and Moldova — three countries that have association agreements with the EU — all have parliamentary systems that have been synonymous with democratisation.

Vox Ukraine, a well-respected Ukrainian think-tank, found that former prime minister Arseniy Yatseniuk’s Popular Front and Mr Poroshenko’s bloc have been the strongest supporters of reform in parliament. Meanwhile, supposedly “pro-western” supporters of reforms are sometimes ambivalent.

Populists such as Yulia Tymoshenko and Oleh Lyashko, for example, are opposed to land privatisation and utility price increases — two key reforms mandated by the International Monetary Fund before it releases its next tranche to Ukraine. Mr Lyashko’s Radical and Ms Tymoshenko’s Fatherland parties were ranked in fourth and fifth places respectively in Vox Ukraine’s survey of support for reform in parliament.

Without the president’s political backing there would not have been parliamentary support for the creation of new institutions to fight corruption. These include the National Anti-Corruption Bureau, the National Agency for the Prevention of Corruption (which monitors electronic declarations by public officials) and the Pro-Zorro system designed to reduce corruption in government contracts.

Legislation to create an anti-corruption court, a third IMF demand, was drafted by the president’s team and is currently going through parliament.

Two traditionally large areas of corruption have been closed in the gas trade and government contracts. State gas company Naftogaz, long a cash cow for corrupt presidents and five years ago consuming 5 per cent of gross domestic product in subsidies, is now the biggest taxpayer to the Ukrainian budget.

Four changes show that Ukraine’s presidency is no longer in bed with corrupt oligarchs.

First, Forbes’ latest list of wealthy billionaires includes seven Ukrainians, three of whom (Igor Kolomoisky, Gennady Boglyubov and Vadim Novinsky) are in opposition to the president.

Second, Mr Poroshenko is not on the Forbes list because his wealth has more than halved from $1.6bn (2014) to $589m (2017), showing that he is no longer gaining financially from his position.

Third, Mr Kolomoyskyy perhaps believed that he would be rewarded financially for supporting Ukraine against Russian aggression in 2014. But instead, he was removed as governor of the Dnipro region and, following the nationalisation of PrivatBank, Ukraine’s largest, he left Ukraine. Kroll Associates, hired to undertake an investigation by the National Bank of Ukraine, found that PrivatBank had laundered $5.5bn during the previous decade when Ukraine’s governments were led by prime ministers Tymoshenko, Viktor Yanukovych and Nikolai Azarov.

Fourth, Rinat Akhmetov and Dmitry Firtash, two oligarchs who gained the most during the presidency of the ousted Mr Yanukovych, no longer have influence with the president. Mr Akhmetov lost many of his businesses in the Donbas while Mr Firtash is under house arrest in Vienna awaiting the outcome of US and Spanish requests to have him extradited to stand trial on corruption in the former and money laundering in the latter.

Another failure to understand corruption in Ukraine is to over-focus on oligarchs while ignoring Ukraine’s underground economy, which remains large although it has reduced in size. The government estimates that a third of Ukrainians continue to work in the parallel economy.

Low-level corruption is difficult to combat because it is widespread and popular, as a report by USAID found in 2015. Ukrainian citizens hold large amounts of cash, typically used to buy property, cars and foreign travel. Ukrainians want the fight against corruption to be led by others, shifting the onus away from themselves and ignoring their own involvement in the underground economy.

A final factor is the complicity of Europe in providing the demand for the supply of corrupt money. The UK (as portrayed in the recent BBC drama McMafia), Austria, Cyprus, Latvia and Luxembourg, as well as offshore tax havens in Panama and the Caribbean, continue to drive this demand. It is hypocritical of the EU to demand that Ukraine fights corruption when its own member states accept dirty money generated by corruption and grant asylum to those fleeing from criminal justice in Ukraine. Gas trader Oleksandr Onyshchenko has been wanted by Ukraine since 2016 and continues to live in comfort in western Europe.

Discussions of corruption in Ukraine should include an assessment of the progress made in creating new institutions, closing previous channels of illicit enrichment and ending close and lucrative relationships between the president and oligarchs, who are no longer influential.

Since the Euromaidan revolution the process of fighting corruption has moved forward at the senior level, but this progress must be complemented by Ukrainians no longer pointing their fingers and blaming others and European governments no longer taking dirty money. A multidimensional approach and shared responsibility of all actors will have better success in the fight against corruption than the traditional focus on the president.

Taras Kuzio is a non-resident fellow at the Center for Transatlantic Relations, Johns Hopkins University-SAIS and author of ‘Putin’s War Against Ukraine’ (2017)