This Chatham House meeting is chaired by Orysia Lutsevych OBE, Deputy Director, Russia and Eurasia Programme. On the panel are: John Lough, Liubov Tsybulska and Mykhailo Zhernakov.
It is a dangerous moment for Ukraine. there is a triple storm. There is the military situation where Russia is putting them under pressure. Also, there is pressure on the energy grid and a crisis there after Russian damage. And also there is a political crisis with the energy problem.
The corruption scandal involves kickbacks for projects related to a nuclear power scheme. These kickbacks are up to $100 million. The people of Ukraine are facing energy shortages and blackouts. This case was inevitable. It is morally repugnant and a gift to the war opposition.
Why is this thing still happening? The system of crony capitalism ‘systema’ has not been broken. It has been simplified. There was a concentration of power in the President’s office by the war. There is a single pyramid of power under Marshall law. Fewer lights are able to shine on the procurement system. Ukrainian elites are comfortable working in the shadows and informal practices are the norm. A small group of people close to the President have developed immense power and there is a culture if impunity.
Safeguards are supposed to exist in Ukraine to prevent corruption. A new class of actors have created these back offices where corruption can thrive.
As a lawyer, Mykhailo focuses on prosecuting people committing these crimes. How can EU’s accession status move things in the right direction? There is a legacy from Soviet times. There is a National Anti-Corruption Bureau. It does an amazing job. The political part of it needs change. Ukrainians have found a way to build protective institutions. It is good that this corruption has been uncovered. It is part of warfare. Russia uses it to undermine Ukrainian democracy. The only choice is to fight back. The management system needs to be updated. Law enforcement and juridical reforms need to be a focus. Ukraine is an open but very corrupt country.
As high level negotiations are going on how can we address it? There is a medical history of the problem. Russia has been reiterating that Ukraine is a fundamentally corrupt country. Perverse logic of the propaganda is that there is a trap with no exit if the corruption is revealed or not. It erodes trust if the Ukrainian leadership among its own citizens and also prevents international support for Ukraine. The President’s friends stole money in a scheme of a traitor who is now a Russian senator in the Putin regime. Moscow and Washington are pushing Ukraine towards unfavorable terms in the settlement of the war. The Russian military is forcing Ukraine to look very weak with its offensive push in the war. The Russians exploited the greed of the President’s inner circle. It weakens Ukraine’s bargaining position. Not only were these people defrauding a critical sector of the Ukrainian economy they were also deliberately working with Russians. What should Zelenskyy do and what is he doing? The situation is very beneficial to Russia. How is the Kremlin using this?
It is a perfect tool for Russia to foment upset in Ukraine and to make international partners disillusioned. Europe has to pick up the burden and the question of corruption in Ukraine comes up immediately. Ukraine is going through a period of systemic transformation. Ukrainian society can build for the future. During COVID The Tories, during a crisis were wide open to corruption. When normal rules are suspended bad things happen. This is a telling example. There are low levels of corruption in the U.K.
On the political side of it two government officials have been sacked. There is a 28 point peace deal situation that has t be dealt with which distracts from the domestic agenda as Ukraine has to be united to deal with this. Hopefully the government won’t undermine the investigators who are addressing the issue. Apparently the President is in full support of the investigation. There is a deficiency in the policy-making decisions and this has led to the corruption situation. Reform of law enforcement and the judiciary is important. the Old Guard are undermining the investigation. Sanctions have been placed on the accused individuals and their assets.
There as been clear communication from the EU that this must be corrected. Ukrainian people had been demonstrating on the streets. even though the war puts pressure on the only way is to deal with this and to push forward to being a proper democracy. The reforms need to be pushed through.
Separation of powers is an underlying feature of democracy. Even during wartime this independence has to be allowed. The healthy bits of the system that are functioning well have to be protected. The EU partners are looking tentatively at how the situation is being addressed. In other countries such as Romania and Bulgaria it has taken a long time to make progress on the anti-corruption front. How will Ukraine rebuild after the war in order to avoid these corruption schemes?
Has faith in Zelenskyy been affected? The Ukrainian people seek justice. They do not see a proper reaction to the request. They want him to clear his house. He doesn’t want to accept this request and to prove Ukrainian civil society wrong. He is concerned with saving his close friends. A lot of the high appointments in the executive have been made directly by Zelenskyy himself. He is reluctant to fire people who might be involved. This situation is being dubbed ‘The Cardboard Revolution’.
Russia holds the narrative power that Ukraine is a basket case and should not get international support. Russia believed that the Ukrainian State was rotten and would crumble under stress but the war has proved that this is not the case. The Russian narratives are self-serving and designed to make European powers change their policies. The Russian situation, with the second largest army in the world, has been unable to conquer a relatively small territory in Ukraine, demonstrating that things are no perfect in Russia.
This case reveals so many different levels of corrosiveness. The results of the investigation will be closely monitored. How can the investigators do their job efficiently? It will take years to sort it out just due to the nature of the investigation with thousands of hours of wiretapping etc to be processed. The incident helps Ukraine to fight its problems. It is an opportunity. WHat can the international community do to help Ukraine to deal with the situation? The money coming in for the war effort needs to continue. The Supreme Court will ultimately be dealing with this issue. The political vacuum needs to be filled.
A lot of crypto-currency schemes and indeed banks in the USA were used to launder the cash so there are enablers involved. Should there be more oversight as Ukraine receives so much money internationally. How can the anti-corruption agencies operate in what will be a hostile environment? How is this affecting army morale? There will be a lot of Russian propaganda affecting the Ukrainian armed forces. The peace negotiations are frustrating the Ukrainians as they see the USA on the side of the Russians. The position of the Ukrainian leadership is not clear. It has a detrimental affect on morale. However, Ukraine can function as a State even with deep, serious internal problems. Ukrainian people empower the Ukrainian leadership to fight, unlike in Russia where it is top down. Democratic forces in Ukraine are helping to tackle the corruption.
How can the situation be dealt with? How has defence procurement been affected? It is a good thing that there is less information about the defence ministry so corruption is not apparent. Not having weapons to fight for their lives would. be a problem. Procurement should be fair and transparent. There are stakeholders nationally and internationally working to ensure that military spending is effective and that third parties are not profiting on procurement. 73% of Ukrainians wanted more international pressure on the Ukrainian government to deal with corruption issues. The international community can help Ukraine.
The President in this situation should hold up his hands and deal with it. He should recognize that it has gotten out of hand and to accept international support. Muddling through is not going to make it. A war of attrition is a war of resources. If resources are constantly diminishing, resources have to be optimized. The closing of USAID affected many layers of civil society in Ukraine, causing them to suffer.
It is a long war and we should not hope that peace is around the corner as this is a false hope. What can help to bolster Ukrainian resilience? Ukrainians have no choice but to fight as it would be impossible to. live under Russian rule. They have to feel that they are working together with the Ukrainian government. Russia is attempting to divide Ukrainians society. Reforms need to be conducted. The Rule of Law and justice inside the country can be improved. It is a cornerstone of everything and important in the EU integration process. Peace will be a continuation of war by other means. The European partners need to restate their commitment to stand by the Ukrainian side. There is abandonment by the USA. Voices need to be heard regarding this from European powers who have fallen silent. The dividing line between Rule of Law and Rule of Force lies on the frontline of the conflict. Ukraine needs to do a clean up and get its house in order.
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