Corruption in Kiev Heavily Impacts Ukrainian Economy

Wednesday, October 20, 2021

Lucas Leiroz, research fellow in international law at the Federal University of Rio de Janeiro.

Corruption problems in Ukraine are on the rise. More and more, the involvement of government officials, politicians, judges, and entrepreneurs in illicit schemes is attracting worldwide attention, so that only the Ukrainian authorities themselves seem to remain inert in the face of such a legal calamity situation. With so much corruption and a real carte blanche for financial crimes, the country’s economy tends to sink further and further, with wealth being concentrated in the hands of small groups, while most of the population suffers.

Since Maidan in 2014, Ukraine has not only progressively moved away from Russia, but has been sinking into an endless political, legal, and economic crisis. In order to form a government with a pro-Western and anti-Russian orientation, several illegal maneuvers were carried out, going far beyond the mere coup d’état. As a consequence, the country’s legal-judicial structure collapsed, with crimes becoming commonplace in the government and in public-private partnerships. After seven years, nothing has changed, except for the worse. Ukraine is being ruled by a financial plutocracy that prevents the country from developing economically and even hinders the consolidation of any political project.

The result is a scenario that does not even interest Kiev’s main western allies, who are also hampered by the legal crisis. Corruption in the country has no limit and even consumes much of the money invested in Kiev by its allied states. For Western governments, accepting that US, EU and UK taxpayers’ money goes to oligarchs and corrupts in Ukraine has become a real problem, pushing changes towards reducing support for Kiev. Indeed, the West has realized that investing in a national project in Ukraine is futile as only a structural change could reverse the serious corruption scenario, so that from now on relations between the West and Ukraine tend to become a mere military partnership, excluding Kiev from the European economic development.

Several of the recent US foreign policy maneuvers can be interpreted in this sense. For example, the cancellation of sanctions against Nord Stream 2 was strongly motivated by Ukrainian corruption. The pipeline facilitates energy cooperation between Moscow and the EU by diversifying routes, creating alternatives to the ones that pass across the Ukrainian territory. In theory, Washington could invest in sanctions to force Europe to buy gas that passes through the Ukrainian route, but amidst the chaos of corruption this would be a strategically useless measure.

The examples go far beyond the energy issue. Currently, an American company called VR Global Partners is involved in a lawsuit against the Ukrainian state monopoly Ukrzaliznytsia, which controls rail transport in the country, on charges of corruption. In a recent decision, the Ukrainian court accepted Ukrzaliznytsia’s allegations, even though there was ample evidence of illegal acts committed by the company. Obviously, this is another sign of the criminal collusion that has been formed between corrupt businessmen, politicians and judges. Regardless of the evidence, judges favor their partners in crimes. For VR Global Partners there was only one solution left: to cancel the operations. With this, another infrastructure project is withdrawn from the country, harming the interests of the Ukrainian people.

For the US in particular, leaving Ukraine has become more than a strategic move, but a real matter of necessity, given the Biden family’s involvement in Ukrainian corruption schemes. Hunter Biden’s participation in Burisma has become a negative mark for the White House. Hunter’s association with local corruption in Kiev was judged real by the very US Senate investigators after months of collecting evidence and data. Denying his son’s crimes is no longer possible for Joe Biden, who now prefers to avoid further links with Kiev.

Zelensky tried to reverse this American “withdrawal” scenario. The Ukrainian president certainly has sensitive information that would further damage the Biden family’s image and supposedly tried to use this in his conversations with Joe in order to take advantage. However, this does not seem plausible currently. Zelensky was cited in the Pandora Papers as being on the list of billionaires with illicit transactions in tax havens. Now both leaders have sensitive information about each other, and the tendency is for both to try to appease these issues.

In a recent survey conducted by the American Chamber of Commerce, it was revealed that 93% of Ukrainian entrepreneurs believe that a legal reform capable of eradicating corruption is the first step for Kiev to achieve economic development and attract foreign investment. The data are alarming and show that Ukrainian society is already fed up with these corruption problems, however, it is necessary to remember that the judicial crisis is also a legacy of the Maidan. A political regime that is born though illegality (coup d’état) can only remain in power through illegality. Crimes have become commonplace in Ukraine because the Ukrainian state itself is criminal and this can only be reversed with a major political reform.

Source: InfoBrics