Ukraine - Corruption - 2011-2020
Ukraine was rated 134 (out of 178) on Transparency International’s 2010 Corruption Perceptions index (down from 99th place in 2006). The global anti-corruption watchdog Transparency International ranked Ukraine 144th out of 177 countries in its 2013 Corruption Perceptions Index. According to Transparency International's Corruption Perception Index, Ukraine ranked 142 out of 174 countries in 2014 - below countries such as Uganda, Nicaragua and Nigeria. Ukraine had showed little progress since the ousting of Yanukovich, according to the index, with its perceived level of public sector corruption in 2014 unchanged from its level in 2012.
In 2013, shadow turnover of the funds made up UAH 280 billion in Ukraine. This figure exceeds annual tax revenues. Those data were made public by First Deputy Revenues and Duties Minister of Ukraine Ihor Bilous at a meeting of the Public Council of the Revenues and Duties Ministry 09 April 2014, a Ukrinform correspondent reported. “We have almost accurately calculated turnover on tax “gaps” in 2013. It was UAH 280 billion,” Bilous said. According to him, about 40% of the shadow capital turnover amount includes the funds, withdrawn from state enterprises. “More funds were eroded from the budget than received. “Tax gaps” are our main tax reserve. Having stopped systemic embezzlement of VAT, we will be able to prevent a catastrophic outflow of cash from the country's economy,” Bilous noted. At the same time, he assured that rising of the tax pressure on business, which honestly pays taxes, was not planned in the country. Bilous also said that activity of so-called “exchange centers” gradually reduces.
Dmytro Salamatin, a Kazakhstan-born Ukrainian, was an MP representing the Party of Regions (President Viktor Yanukovych's party). He had no past connection to the arms trade. Salamatin was appointed in 2010 to be head of Ukrspetsexport. His tenure as chairman of Ukroboronprom was marred by a scandal around disruption in the supplies of armored vehicles to Iraq under the contract worth 457m dollars signed in 2009.
On 8 February 2012, Yanukovych issued decrees dismissing Defence Minister Mykhaylo Yezhel and replacing him with Dmytro Salamatin, who was dismissed from the post of director -general of the state-run arms trading company Ukroboronprom.
On 10 February 2012, MP Andriy Parubiy of the Our Ukraine – People's Self- Defence asked the Security Service of Ukraine to check the information on Salamatin's possible collaboration with the Main Intelligence Department of the General Staff of Russia's Armed Forces. Salamatin served as defense minister until December 2012. Then he served as an advisor to president Yanukovych. Salamatin faced losing his posts due to the recent scandal when he was exposed of giving false information about the year when he got his citizenship before the 2006 parliamentary elections.
Police detained Yevhen Bakulin, the CEO of the national oil and gas company Naftogaz, Ukrainian acting interior minister Arsen Avakov said 21 March 2014. He said the CEO was detained “as part of an investigation into corruption schemes in the oil and gas industry.” Avakov said that only three separate corruption episodes currently being investigated by police may have cost the state about $4 billion. Bakulin was suspected of heading a "criminal group" whose members include other senior officials, Avakov said.
Ukrainian investigators said former Energy Minister Eduard Stavytsky amassed a stash of cash, gold, jewels and expensive watches. The Interior Ministry said a series of raids on Stavytsky's homes and offices uncovered 42 kilograms of gold and $4.8 million in cash. All the valuables were seized. Stavytsky, who was in charge of negotiations on oil and natural gas with Russia, fled the country.
Ukraine’s Verkhovna Rada voted 07 October 2014 for a package of anti-corruption bills submitted for consideration by Ukrainian President Petro Poroshenko and the country’s government, in doing so fulfilling one of the main requirements of the Maidan movement and the West to have a legal basis for the purging of the Ukrainian elite. Ukraine would gain two anti-corruption bodies – the National Commission and the National Anti-Corruption Bureau. The creation of these bodies was largely a forced move by the Ukrainian authorities. This was a requirement of international donors, who have warned that money will be given only if reform was undertaken. The problem may become the very character of the fight against corruption chosen by the Ukrainian authorities, as by creating new official structures, it has become bureaucratic. Another drawback of Ukraine’s legislation was the lack of specific mechanisms for winning the systematic anti-corruption battle. The new authorities may not be so much tools in the struggle against corruption as in the struggle for power.
Bribery and cronyism were widespread throughout all areas of public life since Kyiv gained independence with the collapse of the Soviet Union in 1991. The situation only worsened during the last four years under Yanukovych, when $11 billion was siphoned yearly through the abuse of public procurement tenders alone, Justice Minister Pavlo Petrenko said at a 09 September 2014 news conference. Ukraine's culture of cronyism, bribery and other forms of graft was largely responsible for the flight of Western investors who have abandoned the cash-poor country in the five years since 2010.
Donald Bowser, an adviser to Ukraine's National Anti-Corruption Bureau, said in 2015 that "easily over a dozen billion US dollars a year" continue to be stolen from the Ukrainian state through corruption. Transparency International estimated that Ukrainians pay between 10-20% of income on bribes, and that 80% of Ukrainians pay for services they were entitled to receive free of charge (higher than in any other country surveyed).
The fight against "corrupt mafia" in Ukraine will not stop, even if political opponents hope for this. Prime Minister of Ukraine Arseniy Yatseniuk said this 20 April 2015 in an interview with TV Channel TRK Ukraina. "All these arrests and fight against corrupt mafia continued, continue and will continue. Nobody can mislead me, including political opponents, who arrange all kinds of political scandals," the head of government said.
Financial and technical assistance of the United States to Ukraine depended on Kyiv's success in the fight against corruption, US Ambassador to Ukraine Geoffrey R. Pyatt said 05 September 2015. In all matters of financial and technical assistance to Ukraine, the key to which the assistance will be at the next stage of work in this area was the success achieved during the previous stages. The greater the success in the fight against corruption, the better American partners will be ready to invest in Ukraine, Pyatt told reporters in Kharkiv.
Implementation of a 2014 law on lustration resulted in dismissal of large numbers of state officials in some institutions during the year, in particular 42 percent of the employees of the State Fiscal Service (SFS) central office and 15 percent of regional SFS offices in October 2015.
It took over a year and a half for Ukrainian President Petro Poroshenko to even begin implementing his most important campaign promise: On 01 December 2015, a new head of the anti-corruption prosecution agency was finally appointed, and now the office was ready to start working. US officials thought this took far too long, and they were losing patience with Ukraine's government, especially since Prosecutor General Viktor Shokin, a Poroshenko confidant, had delayed filling the anti-corruption position.
A major challenge for Ukraine’s new tax system was to uncloak the 40 to 60 percent of the economy that avoided government regulation, taxation or observation each year. The Economy Ministry estimated that 42 percent of the nation’s economy, or about $18 billion, was unaccounted for in the first six months of 2015. Since 2008, an average of 44.5 percent of the nation’s gross domestic product had gone unregistered, according to Friedrich Schneider, an economics professor at the Johannes Kepler University in Austria.
On March 15, 2016 Ukrainian lawmakers approved an anticorruption bill establishing public oversight over the assets of both senior and lower-level officials and their relatives. Under the legislation, they now have to file electronic declarations of their income and holdings, and face criminal liability for any inaccurate or falsified information. The data will be open online to anyone's scrutiny. The European Union has been pressing Ukraine to complete anticorruption reforms, and Kyiv hoped the move will pave the way for visa-free travel to EU countries.
By early 2016 organized graft had given way to a free-for-all where bureaucrats grab what they can, while they can. The system of corruption had become more chaotic, more haphazard. Before some issues could be resolved without money, but now these options don't exist -- everyone was on the take.
Economy Minister Aivaras Abromavicius, one of the key ministers in Yatsenyuk's government, resigned on 03 February 2016, stating corruption and pressure from the president's party among his reasons. He called on Prime Minister Yatsenyuk to step down because the country was "caught in a crisis of trust". Radical steps were needed to regain that trust - such as a change of staff on the political level. "A country can't implement successful reforms if the head of government has lousy ratings," he added.
On February 10, 2016 Christine Lagarde, Managing Director of the International Monetary Fund (IMF), issued the following statement: “I am concerned about Ukraine’s slow progress in improving governance and fighting corruption, and reducing the influence of vested interests in policymaking. Without a substantial new effort to invigorate governance reforms and fight corruption, it is hard to see how the IMF-supported program can continue and be successful. Ukraine risks a return to the pattern of failed economic policies that has plagued its recent history. It is vital that Ukraine's leadership acts now to put the country back on a promising path of reform.”
Deputy Prosecutor General Vitaliy Kasko quit on 15 February 2016 in protest over corruption. "Today, the General Prosecutor's office is a brake on the reform of criminal justice, a hotbed of corruption, an instrument of political pressure, one of the key obstacles to the arrival of foreign investment in Ukraine," Deputy General Prosecutor Kasko said in a televised statement.
Crime rates had risen in Ukraine while law enforcement’s ability to investigate them had dropped, the country's first deputy prosecutor general said on 19 March 2016. In the capital Kiev only one in ten reported crimes leads to a court trial. Overall in Ukraine crime detection rate has dropped to about 20 percent, Deputy Prosecutor General Yuri Sevruk said in an interview on with TV channel 112. He voiced the numbers to disprove speculation that the situation was even worse, as some experts in Ukraine claim as few as three or five percent of crimes were solved. “The crime rates have risen over the past five months and the rise was gradual, while crime detection rates have fallen. This is especially true for crimes against property – burglaries, robberies, car thefts,” he said.
Sevruk added that the drop in performance was caused partly by ongoing reforms disrupting the police force, which involved evaluating all serving officers for their fitness to serve in their positions. “They are more interested in finding out whether they would keep their jobs or not," Sevruk said.
Several other factors in addition to reform in law enforcement contribute to the crime hike in Ukraine, experts say. One was the influx of illegal firearms and explosives from the war zone in the East, where Kiev maintains a heavy military presence in the standoff with rebel fighters. Soldiers demobilized from the front line often have difficulties in adapting to civilian life, as evidenced by regular reports of veterans resorting to violence to solve conflicts.
Ukraine's justice minister was on the receiving end of hefty criticism on 23 November 2016 following his appointment of a 23-year-old recent law school graduate to lead the government's anti-corruption office. Minister Pavlo Petrenko insited that he has hired Anna Kalynchuk "on merit" to root out civil servants loyal to ousted President Viktor Yanukovych. The anti-corruption and nepotism purges were one of the main demands of protests which eventually led to Yanukovych's ouster in 2014. President Petro Poroshenko has repeatedly pledged to deal with the issue, though little real impact has been made.
The public reaction to the Ukrainian officials' income statements was shocked dismay at the extravagant lifestyles conjured up by many of the disclosures. An anti-corruption reform requiring senior Ukrainian officials to declare their wealth online exposed a vast difference between the fortunes of politicians and those they represent. Some declared millions of dollars in cash. Others said they owned fleets of luxury cars, expensive Swiss watches, diamond jewelry and large tracts of land - revelations that hit public confidence in the authorities in Ukraine, where the average salary was just over $200 per month. Officials had until 06 N0vember 2016 to upload details of their assets and income in 2015 to a publicly searchable database, part of an International Monetary Fund-backed drive to boost transparency and modernize Ukraine's recession-hit economy. Officials' decision to hold cash pointed to a mistrust in the banks that many Ukrainians could relate to.
Mikheil Saakashvili, the Odesa region governor, declared his resignation 06 November 2016, saying the government continues to pursue old schemes. "When we spoke about changing everything, President Poroshenko said he was hampered by Yatseniuk. We set up the Movement for Cleansing and helped get rid of Yatseniuk. What's the outcome? Yatseniuk's team was curtailed and updated with that of the president, while the looting schemes remained the same. Moreover, Avakov and Nasirov, pillars of corruption, remained in their places," Saakashvili said.
Since the fall of the USSR Western donors poured billions of dollars into Ukraine; however, the country's corrupt elite siphoned off the money to its own pockets instead of building a functioning state. Access to Western assistance has freed the Ukrainian political establishment from carrying out serious economic and political reforms in the country and only heightened its interest in maintaining the status quo.
Neil A. Abrams and Professor M. Steven Fish of the University of California at Berkeley noted: "Only in rare instances have reforms gone beyond artful pandering to Western donors. The reason was simple: Since 1991, when Ukraine gained independence from the Soviet Union, a powerful political and business establishment has wielded uninterrupted control of the Ukrainian state. Not even popular uprisings in 2004 and 2014 or changes of executive power in 1994, 2005, 2010 and 2014 managed to dislodge this elite.... For every dollar of aid that flows into the country, $6.25 illicitly flows out, according to figures from the OECD and Global Financial Integrity..."
According to Josh Cohen, a former US State Department project officer who worked on managing economic reform projects in the former Soviet Union, it was hardly surprising that Petro Poroshenko's government has not succeeded in conducting reforms and fighting corruption. "While Poroshenko's behavior was disappointing, it was not surprising — in many ways, putting an oligarch in charge of a country that desperately requires deoligarchization was akin to appointing an arsonist to head the local fire department".
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