Corruption Could Mean Ukraine Loses a Future Peace

From the ruins of Bucha to Kharkiv, the Ukrainian military has held fast against Russia’s onslaught. Ukraine can win this war—but in dealing with the aftermath of the devastation Russia has wrought, it could still lose the peace. A failed reconstruction process, derailed by Ukraine’s own kleptocrats, poses another serious threat to the Ukrainian state. The European Union and its allies have already committed to helping rebuild Ukraine, such as with the bloc’s newly leaked reconstruction plan, but their efforts must account for the country’s notorious oligarchs. The EU and its allies must work with Ukrainian representatives to maintain oversight over how the reconstruction aid is used, or it risks being siphoned off into the already-swollen pockets of the wealthy.

The EU has a daunting task ahead in Ukrainian reconstruction. In the first two months of Russia’s invasion, the World Bank estimates that $60 billion worth of damage was committed against Ukraine’s infrastructure and buildings. Before that, the World Bank also projected that Ukraine’s GDP would contract by at least 45 percent by the end of the year. Because of Ukraine’s devastation, Ukrainian Prime Minister Denys Shmyhal said that his country needs $5 billion in reconstruction aid each month for up to five months, then another $600 billion total for a broader reconstruction effort.

The European Commission has promised 1.2 billion euros to Ukraine, with an added 2 billion-euro package to Ukraine from the European Bank for Reconstruction and Development. European Commission President Ursula von der Leyen urged EU member states to prepare further reconstruction aid to Ukraine, with the leaked reconstruction report indicating that the European Commission is planning to issue more grants. Additionally, the EU established the Ukraine Solidarity Trust Fund on May 5 to help coordinate external reconstruction aid for Ukraine.

However, the widespread presence of kleptocratic oligarchs throughout Ukraine’s economy and political scene will complicate EU reconstruction efforts, as they may try to exploit foreign aid to replace their own lost billions of dollars since Russia’s invasion. During his election campaign, Ukrainian President Volodymyr Zelensky capitalized on the widespread unpopularity of these kleptocrats by positioning himself as a crusader against the endemic corruption.

Nonetheless, once in office, Zelensky’s anti-corruption campaign moved slowly. A Ukrainian oligarch who helped Zelensky in his campaign, Ihor Kolomoisky, has been sanctioned by the United States because of his involvement in “significant corruption.” Zelensky has denied Kolomoisky ever influenced his decision-making. Yet the president is in a stronger position to carry out his anti-corruption platform now that he has accrued substantial political capital from his wartime leadership. In this context, the EU and its allies must prioritize assisting Zelensky in rooting out corruption when providing reconstruction aid to ensure that it is not stolen by kleptocrats.

At first glance, the EU provides a great deal of capacity-building assistance to Ukraine’s law enforcement and anti-corruption capacity through various preinvasion programs as well. These include the European Union Advisory Mission Ukraine for legal and policing reforms and the European Union Anti-Corruption Initiative in Ukraine for technical assistance in anti-corruption measures. There have been no large-scale corruption scandals relating to the misuse of these EU funds, partly because the EU has high transparency standards.

Still, the less glamorous truth is that the EU’s attempts to improve anti-corruption mechanisms in Ukraine have not had a significant impact. The EU’s own Court of Auditors ruled that the overall EU effort to assist Ukraine’s anti-corruption reforms was “ineffective” in 2021. Consequently, the EU must seriously rethink how it can better develop Ukrainian anti-corruption capabilities given their previous failures to do so.

With that in mind, the EU and other donors party to the Ukraine Solidarity Trust Fund should form an active oversight body within the fund over how it awards contracts. This is to ensure aid contracts are issued in a transparent and competitive manner to prevent corruption and to review and increase technical assistance for anti-corruption capacity in Ukraine. The standards for distributing contracts can be based on the EU’s existing regulations, which have helped prevent the misappropriation of their funds.

Commenting on foreign aid, Kira Rudik, the leader of the Voice party in the Ukrainian parliament, recommended that a “controlling body for [for foreign aid] needs to include both EU members and Ukrainian representatives. It also should release funds once there is a defined plan of how they would be spent.” Rudik further suggested that a decentralized network of local Ukrainian authorities would ensure that reconstruction funds are assigned more evenly and efficiently.

The oversight body should also maintain close relations with Ukrainian anti-corruption institutions like the National Anti-Corruption Bureau of Ukraine and National Agency on Corruption Prevention, as well as nongovernmental organizations like the Anti-Corruption Action Center, helping build Ukraine’s own capacities to fight corruption in the long run. The EU and other donors should encourage these institutions and civil society NGOs to remain politically independent, preventing political interference and keeping their operation more efficient.

When asked for comment on how to recall reconstruction aid if the funding were misused, former Ukrainian Finance Minister Natalie Jaresko said, “Both Ukrainian citizens and international donors will benefit from instituting confidence-building measures, specifically ensuring procurement is transparent and effective. Parties could reach agreement on a single procurement process acceptable to all sides that could be implemented by a standalone specialized Ukrainian government agency, easily monitored by donors, regularly audited, and reported upon to show progress continuously. An international entity resembling the [Office of Inspector General] at the [U.S.] Department of Homeland Security/FEMA [Federal Emergency Management Agency], for example, could do periodic reviews of the effectiveness of that procurement process.” As an example, Jaresko highlighted the recommendation by the Office of Inspector General for some FEMA funds directed toward post-Hurricane Katrina reconstruction to be returned.

The EU and its allies must be vigilant in how they provide reconstruction aid to Ukraine. From the ashes of Russia’s invasion, there is potential for real, lasting change in Ukraine against kleptocracy. The peace can be won with the right support from the EU and its allies.