Dispatch

Ukraine Has Opened Pandora’s Database of Corruption

Ukraine Has Opened Pandora’s Database of Corruption

KIEV and WASHINGTON — In the early morning hours of Oct. 31, shortly after the midnight filing deadline, the incomes and assets of tens of thousands of Ukrainians officials and lawmakers became publicly available in an online database for the first time in the country’s history. That many of Ukraine’s political class are wealthy is hardly a secret, but the electronic disclosures — which became mandatory as part of a long-awaited reform program that passed in October 2014 — give a next-level glimpse into the decadence of Ukraine’s elite.

In a country where the average monthly income is roughly $200, revelations that elected officials have personal holdings worth hundreds of millions of dollars in real estate and eccentric items, like Fabergé eggs, Japanese art, and even a ticket to space, are now causing a public uproar. In the four days since the database went public, many Ukrainian voters and Western allies have been left questioning the post-revolutionary government’s commitment to a political system defined by personal enrichment.

Passed in the wake of the revolutionary euphoria that saw the ouster of corrupt former President Viktor Yanukovych, the electronic declaration law survived numerous attempts by lawmakers to delay or water it down over the last two years. The new declaration system mandates that officials publicly disclose all assets in their name, as well as those in the name of their family members. The intention of the declarations is first to provide transparency and do away with the corrupt practices that sparked the Maidan protests. Moreover, by making public the wealth of officials, it opens them not only to scrutiny but also potentially to criminal prosecution for a false disclosure — a major accomplishment for a system of government characterized by corruption and influenced by oligarchs.

The 2015 filings of the country’s top leadership were particularly staggering: Ukrainian Prime Minister Volodymyr Groysman, who has been a public official for the past 14 years, declared that he and his wife hold the equivalent of more than $1.8 million, not including a collection of 12 luxury watches that varied in value from $10,000 to $20,000 each. The declaration of Ukrainian President Petro Poroshenko, a billionaire who ran a successful chocolate business before he was elected president in May 2014, revealed $26.3 million in bank accounts and ownership of 104 companies. Ihor Kononenko, the deputy head of Poroshenko’s parliamentary faction, declared more than $72 million in real estate assets. The declaration of Arsen Avakov, Ukraine’s interior minister, showed hundreds of thousands of dollars and euros in cash and expensive paintings, clocks, and vintage wines worth millions of dollars.

The declarations come as public disillusionment over the government’s inability to enact reforms is rising and fatigue among Ukraine’s Western backers over rampant corruption is high. In a country like Ukraine, where politicians have not had their financials publicly scrutinized, the declarations will be a major test for Kiev’s newly created anti-corruption agencies. But there is some lingering doubt over whether any investigations prompted by the declarations will dig deep enough; these agencies have limited resources and are sure to face political obstacles. However, should any exposed corruption or open questions over how so many career politicians became so wealthy go uninvestigated, it also risks alienating the Western capitals — like Washington and Brussels — that Kiev relies on for financial and political support.

“It’s a miracle what we are now witnessing,” Daria Kaleniuk, the executive director of the Anti-Corruption Action Center, a Kiev-based nongovernmental organization (NGO), told Foreign Policy. “There were so many obstacles and so much pressure inside the country on the senior level against this system that we were hardly able to protect it,” she said, referring to the political resistance that civil society groups faced in pushing the strict legislation.

Yet, despite the successful enforcement of the deadline, anti-corruption activists in Ukraine say they doubt that officials have declared all their wealth, with assets like yachts and foreign villas likely still hiding in unnamed offshore accounts. But Kaleniuk is excited that a system of transparency she and others have fought for is finally becoming a reality. Pursuing high-level reforms in Ukraine is a careful balancing act juggled by activists, allies within the government, and foreign governments, and according to Kaleniuk, no one has any illusions that the process will become simpler. But this new treasure trove of financial information could lead to more investigations into the wealth of top officials, which should only foster more transparency.

But just when this kind of international scrutiny is needed, most of it may be fading. After two years of paying steady attention following the Maidan revolution and the simmering war in eastern Ukraine, there is growing fatigue with the slow pace of Kiev’s reforms, and support within the EU for keeping biting economic sanctions on Russia is quickly eroding. Meanwhile, in Washington, where the U.S. government has committed more than $1.3 billion in foreign assistance to Ukraine since late 2013, frustration with Kiev’s failures to curb corruption is high and has policymakers debating new measures of how to force the Ukrainian government’s hand in fighting graft.

“It’s still a big, big problem. They haven’t done nearly enough of a good job in going after oligarchs,” a U.S. congressional staffer who requested anonymity and works on Ukraine and Russia policy told FP.

Since the annexation of Crimea and the outbreak of war in eastern Ukraine in 2014, Washington has pushed the EU to maintain sanctions against Moscow and called for a resolution to the conflict in Donbass through the stalled Minsk peace process. U.S. President Barack Obama declined to send lethal aid to the Ukrainian military, and U.S. policy has instead focused on supporting economic and political reforms to make Ukraine a more attractive alternative to the Russian-supported separatist areas. Ukrainian officials have publicly supported these reforms, in large because their implementation is required for the continued flow of Western financial aid. But Kiev has often watered down the same reforms after they came into law, undercutting their effectiveness. For instance, the newly created National Anti-Corruption Bureau of Ukraine was locked in conflict with the general prosecutor’s office over jurisdiction this summer, in what many observers interpreted as a war between reformers and the old guard of Ukrainian politics that has derailed the investigation of corruption at the highest levels.

Despite mounting doubt in Washington over Kiev’s commitment to reform, the public disclosures have earned Poroshenko another lifeline from his Western backers. The e-declaration system is a final requirement for Ukrainians to be eligible for visa-free travel within the EU and will help earn more financial assistance from the International Monetary Fund, which currently has $1.6 billion of aid on hold due to concerns about Kiev’s inability to limit corruption. But Ukrainians’ own post-revolutionary support of their leaders is rapidly wearing off. A new poll released by the International Republican Institute (IRI) on Oct. 31 found that public frustration with the government’s performance is growing, with 72 percent of respondents saying that the country is moving in the wrong direction and general dissatisfaction, particularly due to Ukraine’s sluggish economic performance and rampant corruption, on the rise.

According to Stephen Nix, IRI’s director for Eurasia, widespread disappointment with the government looks to be a long-term trend in Ukraine. “The government has to realize that the window is closing on this,” Nix told FP, referring to popular anger over the slow pace of reforms. “They have taken some concrete steps but clearly not enough.”

Politicians have asked Ukrainians to endure government austerity programs and economic hardship as the country’s currency, the hryvnia, has lost more than 70 percent of its value against the dollar since 2014 and salaries have failed to keep up with inflation. The Maidan revolution that led to the ouster of Yanukovych began in late 2013 with people protesting against endemic graft and the government’s failure to sign an association agreement with the European Union. But more than two years later, Kiev is far from achieving the political and economic progress that the revolution embodied, and the country has since grappled with the twin crises of the war in eastern Ukraine and reforming its corrupt politics.

Despite these roadblocks to reform, some progress has been made in Kiev. A new online procurement system, established in August after a pilot program, has saved money for Ukrainian taxpayers by limiting avenues to abuse government purchases. Moreover, the overhaul of the country’s inefficient gas sector and the creation of a new police force have been lauded as successful examples of progress. However, many of these reforms have not been applied to their full potential, fostering a growing perception in Washington and Kiev that the Ukrainian government is enacting reforms to appease Western donors while still trying to preserve the old corrupt system of power in politics.

“Ukraine has introduced new reforms. But the problem is that they don’t always see them through,” said William Pomeranz, the deputy director of the Kennan Institute at the Woodrow Wilson Center, a think tank in Washington. “One has to encourage the reforms as best one can.”

On Thursday, Ukraine’s anti-corruption movement faced its first setback after hoping to capitalize on the new declaration system. Lawmakers in parliament announced that they would debate a new bill that would require all organizations receiving foreign funds for anti-corruption work to submit financial disclosures of their own. Activists see the proposed measure as retaliation by Ukrainian officials for the new declaration system, and Kaleniuk, the anti-corruption activist, likened the bill to a Russian law that requires NGOs that receive international funding to register with the state as “foreign agents.”

This latest effort to impede reform will cast a shadow over Kiev as its political and financial backers in Brussels and Washington experience upheaval of their own. Brexit negotiations and the migrant crisis are currently draining the EU’s attention, and the outcome of the U.S. election could have major implications for Ukraine and its neighborhood. Democratic nominee Hillary Clinton has already voiced support for Kiev’s standoff with Moscow, but her Republican opponent, Donald Trump, has parroted Russian talking points and offered little sympathy for Kiev’s conflict with the Kremlin. “There is a chance for Ukraine to fall off the agenda if [Western] leadership is not shown,” former Ukrainian Finance Minister Natalie Jaresko, now a fellow at the Atlantic Council, a Washington-based think tank, told FP.

Looking ahead, the Donbass war’s importance to any U.S. foreign-policy decisions regarding Russia means that Ukraine will continue to be a priority for the next U.S. president. But frustration with Kiev’s domestic setbacks, and a potential Trump presidency, could see Ukraine’s wider interests ignored and relegated to being solely a Russian policy issue.

“It’s a high risk to remain important only because of the war,” Jaresko said. “We also need to be important because of our performance.”

FP’s Dan De Luce contributed to this report.

Photo credit: TOBIAS SCHWARZ/AFP/Getty Images