Battling corruption in Ukraine | Financial Times

Welcome back. Penny Pritzker, the newly appointed US special representative for Ukraine’s economic recovery, was in Brussels this week discussing postwar reconstruction. Perhaps her most eye-catching remark was the suggestion that frozen Russian assets should be mobilised, if it’s legally possible, to cover some of the costs.

However, Pritzker made another important point: Ukraine and its western supporters must “ensure that recovery takes place in line with international best practices, and that includes reforms that bake transparency and accountability into the effort. So reform and recovery go hand in hand.”

This was a polite way of saying that Ukrainian politicians, military officers, the judiciary, officials in public administration, business leaders and society as a whole must vigorously continue their other war — the war against corruption at home. How well is this second war going? I’m at [email protected].

Three reasons for fighting corruption

The struggle to suppress corruption is essential for three reasons. First, it will enable Ukraine to prosecute its war of self-defence against Russia more effectively. Second, it will improve Ukraine’s prospects of joining the EU and taking its place in the world as a modern, democratic, prosperous country alongside its international partners.

Above all, it will dispel once and for all the image Ukraine acquired after the Soviet Union’s collapse in 1991 as an unreformable country rotten with corruption, organised crime and general illegality. This image suited Russia’s interests perfectly, permitting the Kremlin to insinuate that Ukraine’s long-term future and legitimacy as an independent state would always be in doubt.

Conversely, the more successfully Ukraine cracks down on corruption and consolidates democracy, the sharper the contrast with Vladimir Putin’s Russia, which is neither democratic nor (to put it mildly) free from corruption. This argument is impressively set out in “Russia’s War Against Ukraine”, a new book by Gwendolyn Sasse, director of the Berlin-based Centre for East European and International Studies.

How much progress?

As we see in the chart below on perceptions of corruption prepared by the Transparency International watchdog, Ukraine has made progress since 2012 — steady, but rather modest progress.

To be clear, Ukraine is unquestionably a different country from the 1990s. In a report released on Wednesday, the German Marshall Fund of the United States, a non-partisan think-tank, said:

“Compared to the closed post-Soviet oligarchy that it was before the 2014 Revolution of Dignity, Ukraine is now an open society governed as a vibrant democracy that responds to a deep-seated mandate to chart a European future unencumbered by domestic corruption or Russian imperialism .

“The Ukrainian government has built a politically independent suite of specialised anti-corruption agencies . . . Kyiv also decentralised governance to empower local communities, restructured entire sectors of the economy plagued by corruption, and instituted world-leading systems of transparency across the political-economic system.”

Compare this to how the picture looked in the pre-2014 era of Ukrainian independence. In a detailed report published in May 2022, Iffat Idris of the UK’s University of Birmingham made a particularly important point about eastern and southern areas of Ukraine now under Russian occupation:

“Corruption was a massive problem in Ukraine long before the conflict in the east. Moreover, it involved all levels of the government system and was strongly linked to organised crime. OCGs [organised crime groups] were especially prevalent in Crimea, while Donbas was even more notorious for criminality.”

Zelenskyy cracks down

Over the past two months, President Volodymyr Zelenskyy has intensified efforts to clamp down on corruption. As outlined in this special report by the Reuters news agency, he shook up regional military recruitment centres in August after an audit exposed various abuses, including illegal enrichment and efforts to help draftees escape military service.

Soon afterwards, police ordered the oligarch Ihor Kolomoisky, one of Ukraine’s richest men, to be detained on suspicion of fraud and money laundering. This was a noteworthy step, because Kolomoisky was once close to Zelenskyy and played a role in the former comic actor and political outsider’s victorious 2019 presidential election campaign. Defence lawyers said they would appeal against the ruling on Kolomoisky’s behalf.

Zelenskyy also removed Oleksiy Reznikov as defence minister. Although he wasn’t accused of personal wrongdoing, Reznikov fell from grace because of the perception that he had mishandled graft scandals in the defence ministry.

We should also keep in mind that, back in May, the authorities detained none other than the chief justice of the Ukrainian Supreme Court, Vsevolod Kniaziev, on suspicion of taking bribes from an oligarch. Kniaziev denies the allegations.

Is corruption treason?

There are some concerns about the way Zelenskyy and his advisers are implementing the anti-corruption campaign. In a recent interview, the president disclosed that he wanted to change Ukrainian law in order to equate corruption with treason in wartime.

“I understand that such a weapon cannot operate constantly in society, but during wartime, I think it will help,” Zelenskyy said.

Some Ukrainian anti-corruption campaigners, and some of Ukraine’s friends abroad, don’t agree. Daria Kaleniuk, executive director of the Anti-Corruption Action Center in Kyiv, says the proposal “poses huge risks to democracy in Ukraine”.

Similar reservations have been aired by Viola von Cramon-Taubadel, a German Green politician who sits in the European parliament.

We should bear in mind the wise words of George Beebe, a former US intelligence analyst, writing on the Responsible Statecraft website: “As a rule, wars put strains on democratic liberty.”

Ukraine’s EU membership bid

Getting on top of the corruption problem is a precondition of advancing Ukraine’s hopes of becoming a fully fledged member of the EU. Practically all EU pronouncements on multibillion-euro aid plans for Ukraine, or on the bloc’s possible future enlargement to the east, include a reference to the need for a sustained fight against corruption.

It’s a sensitive issue because, should Ukraine join the EU, it will be one of the bloc’s poorest members, but with one of its biggest farming sectors. In principle, it would therefore be eligible for large-scale regional aid funds and agricultural subsidies — even if one assumes these programmes are reformed in advance of EU enlargement.

An important question is whether some existing EU member states might resist Ukraine’s admission on the grounds that they would receive less from the EU budget than now, and maybe become net contributors.

I’d like to draw your attention to a policy paper by Michael Emerson of the Brussels-based Centre for European Policy Studies. It was published this week by the International Centre for Defence and Security, a think-tank in Tallinn.

Emerson concludes that the budgetary costs of Ukrainian entry are manageable. If Ukraine were a full EU member today, it would benefit from about €18bn-€19bn a year in net receipts from the EU budget. Only one country, Spain, would turn from net beneficiary into net payer into the budget. All central and eastern European countries that joined the EU in and after 2004 would remain net beneficiaries.

Emerson told me that, even if other EU membership candidates, such as Albania, Moldova, Montenegro, North Macedonia and Serbia, were to accompany Ukraine into the bloc, his conclusions about the budgetary impact would remain the same.

So the road ahead for the EU and Ukraine may be brighter than some imagine. If the financial challenge of Ukrainian membership isn’t insurmountable, then there is all the more incentive to get to grips with one of the other major obstacles — corruption.

More on this topic

Teaching Crimeans to speak Ukrainian again — a report by Elina Beketova for the Center for European Policy Analysis think-tank.

Tony’s picks of the week

• UK prime minister Rishi Sunak’s strategic policy reset appears to consist of acknowledging that the manner in which the Conservative party has governed for the past decade is no way to run a country — the FT’s Robert Shrimsley delivers his verdict

• Nine months before the next European parliament elections, EU commission president Ursula von der Leyen is thought to have her eye on a second term in office, but member states are far from unanimous in supporting her ambitions or her policies, Georgina Wright and Cecilia Vidotto Labastie write for the Paris-based Institut Montaigne