Thursday, June 9, 2016

Ukraine Struggles to Shake Off Legacy of Corruption


KIEV, Ukraine — The text message to Ukraine’s minister of economy and trade was as unwelcome as it was unexpected. The sender, a stranger, wrote that he wanted to be the new deputy minister.

The minister, Aivaras Abromavicius, a former investment banker from Lithuania, had joined the government amid promises by the new Western-backed leaders to clean up the country’s corrupt economy. Having no need or desire for a deputy, particularly someone he knew nothing about, Mr. Abromavicius tried to brush off the applicant.

“We don’t have the possibility to create a new position,” he wrote back.


“I think they will make one,” the man replied in another message, this one saved on the phone and released after Mr. Abromavicius resigned, in part over this exchange.

“I got this offer from the team of Petro Oleksiyovych,” the man wrote, referring to the country’s president, Petro O. Poroshenko. “Who specifically?” the minister asked.

Ihor Kononenko — a former army pal and business partner of the president — the applicant replied without hesitation.

This case of possible influence-peddling is under review by Ukraine’s National Anti-Corruption Bureau. But it is hardly the only worrying sign for a government swept into power in 2014 on a wave of popular anger at the egregious corruption of the previous president, Viktor F. Yanukovych, with promises of cleansing Ukraine of its endemic corruption and establishing a modern, Western-oriented democracy.

Ukraine’s problems are not just its own. As a plum in the new Cold War-like struggle between Russia and the West, Ukraine received a four-year, $40 billion bailout package in 2014 from Western governments and theInternational Monetary Fund.

But over the winter, with Kiev, the capital, buzzing with claims of Mr. Poroshenko’s people cutting back-room deals to control state assets, the I.M.F. quietly suspended disbursements. When the fund’s board convenes in Washington this summer, it will have to decide whether to resume the payments. To reopen the financial spigot, it must certify that the money will be used to help Ukraine overhaul its economy, rather than line the pockets of the country’s politicians and the powerful class of ultrawealthy businessmen known as the oligarchs.

The decision will revolve in great part around Mr. Poroshenko and the men around him. Alarmed Western officials, including Vice President Joseph R. Biden Jr., have traveled to Kiev in recent months to plead with Mr. Poroshenko to stay on track, but few close observers expect significant changes.

“They are like bad students, always saying, ‘Professor, just wait until Monday; I will do better,’” said Tymofiy S. Mylovanov, president of the Kiev School of Economics. “Nothing changed. The same elites are there. The same oligarchs.”

Mr. Poroshenko, he said, had fallen into the old habits of rule through associates and negotiations with the oligarchs. “The disappointment is very widespread,” Mr. Mylovanov said.

Mr. Poroshenko, who took the helm of a country at war and in deep recession, has asked for patience and says he is overhauling the government and the economy. He points to his formation of a capable army as the principal achievement of his tenure.

“Fighting corruption is priority No. 1,” the president’s press office said in a statement. It said that the National Anti-Corruption Bureau planned to train with the F.B.I. and that Anders Fogh Rasmussen, the former Danish prime minister and NATO secretary general, was appointed on Friday as a special adviser to the president.

The post-Soviet titans of business have always held sway over state policy in Ukraine through, among other means, the figures known as the smotryaschi, or the watchers. These are loyal politicians and functionaries ostensibly working for the state but in fact keeping an eye on state assets, to ensure that their true bosses win a share of the spoils.

Despite its Western leanings, the Ukrainian government is seeded with these watchers, who hold midlevel positions in Parliament and various ministries, frustrating efforts to overhaul and clean up their practices, which would limit opportunities for payoffs.

Mykola V. Martynenko, for example, who was believed to have been the watcher for energy sector businesses, was forced in December to resign his seat in Parliament and his position as deputy head of the People’s Front, the party of the former prime minister, Arseniy P. Yatsenyuk. The resignation came after it emerged that Swiss prosecutors had opened an investigation into whether Mr. Martynenko, while working in government, had helped an equipment supplier win padded contracts from the national nuclear power company Energoatom, in exchange for a $29 million bribe.

Mr. Abromavicius resigned in February to protest what he characterized as pressure from the man widely understood to be Mr. Poroshenko’s watcher, Mr. Kononenko. Mr. Abromavicius and other former officials said in interviews that executives from the president’s business empire and allied politicians had quietly been tightening their grip on power this year, while technocrats like Mr. Abromavicius and the former finance minister Natalie A. Jaresko, a Ukrainian-American, have been forced out.

Ukraine’s new prime minister, Volodymyr B. Groysman, appointed in April, served previously as mayor of Vinnytsya, home to a major factory of the Roshen Confectionery Corporation, the site of one of the largest candy makers in Eastern Europe and a centerpiece of Mr. Poroshenko’s business.

Mr. Kononenko, for his part, is first deputy chairman of Mr. Poroshenko’s political faction in Parliament, the BPP group, and was a co-owner, with the president, of a Ukrainian bank.

In 2014, state-owned companies lost about $9.7 billion, mostly because of energy subsidies but also because of embezzlement and abuse. It was a sum covered by I.M.F. lending and American and European bilateral aid.

In his resignation letter, Mr. Abromavicius accused Mr. Kononenko of maneuvering to control one such asset, a state-owned ammonia shipping company, Ukrkhimtransamiak.

But critics wonder whether things will ever change, at least under Mr. Poroshenko. Even the simplest and seemingly least divisive step — prosecuting those responsible for theft of state property and other corrupt acts under Mr. Yanukovych, the former president — has never materialized.

Vitaliy V. Kasko, a prominent Kiev lawyer who defended protesters pro bono during the Maidan revolution, was appointed director of the internal affairs bureau in the prosecutor’s office, the General Inspectorate, with the task of sorting out why the incumbent prosecutors had shown no interest in pursuing obvious corruption cases. But soon enough, he hit a wall.

The Ukrainian authorities asked the European Union to impose sanctions on 22 Yanukovych-era officials, yet none of them have faced prosecution at home.

“There’s an unstated agreement,” Mr. Kasko said in an interview at Très Français, a popular lunch spot off Maidan Square, where dozens of protesters were killed in 2014. “The prosecutor will look the other way if it’s in the interest of the leadership.”

Revealing the criminal origins of these former officials’ money, Mr. Kasko said, would inevitably also reveal and destroy lucrative corruption strategies.

“The simplest scheme is to siphon money out of a state company,” he said. “The same schemes used under Yanukovych are used today.”

Mr. Abromavicius, the minister of economy, had made a priority of cleaning up state companies — of which there are 1,824 in Ukraine, some as small as a single apartment building owned and rented out by the government. To cut down on graft, he created an electronic tender system, called ProZorro, and convened an independent panel to appoint chief executives on merit for every company.

“That is when all my problems started,” he said. He came under intense pressure from the president’s office to have Poroshenko loyalists appointed to key positions in the state companies.

Mr. Kononenko has denied wrongdoing. The applicant, Andriy P. Pasishnik, an executive at the state oil and gas company, later said he did not have the backing of Mr. Poroshenko or Mr. Kononenko, and said he was just bluffing.

“The guy, out of the blue, sends me a text saying, ‘I want to be your new deputy minister,’” Mr. Abromavicius recalled in an interview in Kiev. “I have no reason to believe what this guy said was not true.”


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