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Money Still Rules Ukraine
President Poroshenko talks big about reform — but he’s missing what may be his only chance to break the power of the oligarchs.
A few weeks ago, Ukrainian President Petro Poroshenko published an article in the Wall Street Journal trumpeting his achievements in office. First and foremost among them was his claim that his government has made progress in combating the legacy of “more than 20 years of Soviet-style governance, endemic corruption, cronyism and inefficient policy.” He cited efforts to launch a new police force that will, it is hoped, be free of entrenched corruption. He described efforts to reform the judiciary, long riddled with graft, and boasted about his success in recruiting “young reformers” from outside the country to bring “new faces” into the government.
Above all, he proclaimed a new approach to governance, one, he claimed, that embraces openness and accountability to its citizens. “Today, following free, fair and internationally praised elections,” he wrote, “the Ukrainian leadership is transparent and accountable as never before.”
It all sounded wonderful — so wonderful, in fact, that I decided to take the president up on his promises. I was particularly intrigued by his claim that, “[o]ver the past year, 2,702 former officials have been convicted of corruption.” If this were true, surely there would be no reason for his government to conceal the details. Such an amazing track record would be a remarkable achievement. (And it’s worth noting that criminal trials in Ukraine, as in most countries, are generally open to the public.)
And yet, when I asked the presidential administration for a list of those prosecuted, they refused. When I wanted to know why, they said only that the names are “confidential.” So much for the much-touted new transparency of post-Euromaidan Ukraine.
Sadly, this unwillingness to allow closer scrutiny of Poroshenko’s much-ballyhooed reform effort is indicative. The president is under intense pressure from Washington, Brussels, international financial institutions and of course Ukrainian citizens to deliver on his promises of reform and reducing corruption. Yet changing the name of Ukraine’s main law enforcement body from “militia” to “police” does not, in itself, entail a dramatic transformation of the bloated, corrupt, and incompetent Ministry of Interior. Similarly, all the positive headlines can’t conceal the fact that the president’s campaign against corruption is stalling, with 72 percent of Ukrainians believing Ukraine is heading in the wrong direction, citing the conflict with pro-Russian separatists in the east and corruption as the two main issues facing the country.
The grim reality is that the real rot within the Ukrainian state has always begun at the top, from a corrupt and cynical nexus of high-ranking politicians and business magnates — and it is precisely here that Poroshenko’s efforts are failing to gain traction. Ukraine’s reforms are not threatened by the kind of petty bribery common to many countries, but by high-level corruption on a scale so great that only three out of 15 countries in the former USSR have worse records, according to the anti-corruption watchdog Transparency International.
The central problem is the president’s failure to follow through on his promises to combat the pervasive influence of the oligarchs — politically well-connected business tycoons whose domination of key sectors of the economy is amplified by their ownership of influential media assets. Discontent with the oligarchs was one of the drivers of the Euromaidan movement that swept away former President Viktor Yanukovych, who was regarded as the epitome of the oligarchic system. Ironically, though, the elections that followed his overthrow brought to power none other than the billionaire-cum-politician Poroshenko (who once held a senior government position under Yanukovych). In his new book, Ukraine: What Went Wrong and How to Fix It, Anders Aslund writes that “big businessmen have captured the state in Ukraine, more than any other post-communist country,” and warns that “the power of the oligarchs has to be broken” if reforms are to be successful.
Knowing that efforts to reform the system will be credible only if the power of the tycoons is curtailed, Poroshenko has made “deoligarchization” one of the planks of his anti-corruption campaign. He created an enormous stir a few months ago when he fired Ihor Kolomoisky, one of the country’s most powerful businessmen, from his position as governor of the Dnepropetrovsk region. In June, a National Anti-Corruption Bureau was established. Parliament adopted a tough “lustration law” designed to weed out Soviet-era officials (and, presumably, the associated mindsets). Poroshenko has also appointed a high-profile outsider, former Georgian President Mikheil Saakashvili, as governor of the notoriously corrupt Odessa region.
But Ukrainians aren’t buying it. A recently released poll by the International Republican Institute found that 40 percent of Ukrainians see no changes taking place, while 32 percent believe changes are taking place too slowly. Critics contend that the few high-profile arrests of officials are “cheap spectacle” and “a Potemkin village of empty crackdowns.” Only last month, Ukraine’s leading civil society organizations called on the president to “unblock” his stalled anti-corruption efforts.
They are reacting to Poroshenko’s failure to curb the power of the oligarchs, who still control the country’s economy and its main television channels. Ukraine’s ruling elites have always had de facto immunity from prosecution and they continue to be above the law, untouched by the “deoligarchization campaign.” Some have been permitted to flee Ukraine to escape civil society’s demands for criminal prosecution. Despite his removal as governor, Kolomoisky continues to control the country’s largest bank as well as one of its most influential television networks. Perhaps most bizarrely of all, the business empires of Yanukovych’s allies, including his eldest son Oleksandr, are still in place in eastern Ukraine, and they continue to profit from them.
Any effort to declaw Ukraine’s oligarchs has to start with the country’s notoriously corrupt energy sector, which has sucked billions from the budget. Perhaps the most visible of the country’s energy tycoons is Dmytro Firtash, who began trading gas in the 1990s with the support (as he admitted to the U.S. Ambassador to Ukraine) of mafia don Semyon Mogilevych, who is wanted by the FBI. Firtash and the other members of what has been called the “gas lobby” have successfully cultivated mutually profitable ties with all of Ukraine’s presidents (including Poroshenko), the prosecutors’ office, and the security services. Indeed, U.S. diplomatic cables from Ukraine leaked to Wikileaks showed more detailed knowledge of corruption in the energy sector than that possessed by Ukrainian presidents or law enforcement, who have continually denied close links between Firtash and themselves.
In fact, Poroshenko has a long record of collaborating with Firtash that goes back to Leonid Kuchma’s presidency prior to the 2004 Orange Revolution. Less than a month after the Euromaidan revolution, Poroshenko travelled to Vienna with boxing champion (and now mayor of Kiev) Vitaliy Klitschko to seek political support from Firtash, who was awaiting trial there over U.S. demands to extradite him to face corruption charges. While they were in Vienna, Poroshenko and Klitschko struck a deal granting the leaders of the “gas lobby” (Firtash, former Energy Minister Yuriy Boyko, and Yanukovych’s Chief of Staff Serhiy Lyovochkin) immunity from prosecution in exchange for the oligarchs’ support — in the form of money, media, and connections — for their political ambitions. “We got what we wanted — Poroshenko as president and Klitschko as mayor,” Firtash bragged to the Viennese court. It would have been impossible for the Yanukovych regime to carry out its corrupt schemes without Lyovochkin’s involvement — but today he is untouchable because of the Vienna immunity deal that he helped to broker.
In agreeing to give immunity to the “gas lobby” in a political bargain, Poroshenko is not only breaking his promises to rid Ukraine of its oligarchs — he may be sowing the seeds of a future counter-revolution. Lyovochkin and former Energy Minister Boyko are leaders of the Opposition Bloc party in parliament, which is comprised of former Yanukovych supporters and holds extreme pro-Russian positions at odds with Poroshenko’s declared course of European integration.
Even aside from his cynical political maneuvering, Poroshenko has hamstrung his own efforts to prosecute wrongdoing by mishandling reforms and appointments of senior law enforcement officials. The prosecutor’s office, massively over-manned and itself corrupt to the core, has remained virtually untouched. Poroshenko has compounded the problem by appointing incompetent and corrupt chief prosecutors who quickly discredited themselves through inaction or by defending their corrupt colleagues. This has served to perpetuate an all-encompassing culture of selective justice: ruling elites and oligarchs are never prosecuted (unless they happen to run afoul of law enforcement in other countries), while regular citizens are almost automatically declared guilty, as evidenced by a 99 percent conviction rate.
Vitaliy Yarema, the general prosecutor appointed after the Euromaidan, left office in disgrace after only a year after failing to prosecute a single member of the Yanukovych regime for murder and grand corruption that brought Ukraine to the verge of bankruptcy. In mid-July, parliament began procedures to remove his replacement, Viktor Shokin, after only six months in the position. Ukraine’s civil society groups have burned effigies of Shokin in protest of his obstruction of investigations into high-level corruption and the murders of unarmed Euromaidan protesters.
Poroshenko touting 2,702 officials convicted for corruption is a very poor attempt at misleading Ukrainians and the West. The recent IRI poll shows that his lack of political will to confront corruption is being noticed by an increasingly discontented citizenry. His failure to meaningfully address the problem will rule out his chance for a second presidential term, as it did for the Orange Revolution’s victor, President Yushchenko, who received only five percent of support in 2010 and opened the door to Yanukovych’s counter-revolution.
As the second anniversary of the Euromaidan protests approaches in November, Ukrainians are growing increasingly disillusioned, nationalist populists are gaining popularity and calling for Poroshenko’s ouster, and pro-Russian forces and oligarchs are untouched by Ukraine’s corrupt judicial system and remain as powerful as before. Poroshenko needs to follow through on his promises. If, as it seems, he will not, Ukraine’s European integration will grind to a halt — and the Euromaidan revolution will be remembered in the same inglorious way as the Orange Revolution a decade ago.
Photo credit: SERGEI SUPINSKY/AFP/Getty Images