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Ukraine now a bottomless pit for Western aid. With no attention to its chronic corruption

The longer the war stretches, the more Ukraine's ability to fight systemic corruption gets diminished as more money and weapons will flow to sustain the country.

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Are the billions of dollars flowing into Ukraine as military, macro financial and humanitarian aid from the West going into the right hands? Questions have been raised if the country’s infamous post-Soviet legacy of Russian style kleptocracy  would exploit this vulnerable situation and impede the judicious distribution of aid money. What oversight mechanisms exist to ensure comprehensive review of the aid flowing into Ukraine?

After 1991, several new countries in the region adopted democratic institutions but could not rid themselves of corrupt individuals and practices. While corruption has been endemic in eastern and central European societies, the stakes are disproportionately higher for Ukraine.

Especially now when the country operates in the emergency matrix of fighting off fresh attacks, it becomes incumbent upon the West to better regulate its largesse to avoid misappropriation in the channels of delivery.

Corruption and Communism

For years, Ukraine has been waging a two-front war, externally with Russia’s imperialist ambitions, and internally with the leviathan of corruption. The dual struggle, although bound in repercussion, is incommensurate in modalities. The focus has unduly been on the externalities. However, unless it is ensured that the demons of favouritism and ghosts of embezzlement do not unleash amid such dire straits, the purpose of the aid stands defeated.

The protracted war has made Ukraine a bottomless pit, endlessly absorbing Western aid. The longer the war stretches, the more its own ability to fight systemic corruption gets diminished. Therefore, during the course of the war, mechanisms have been promulgated by the aid givers themselves.

Learning from the disasters in the Middle East, American senators had been cautious with the aid packages to Ukraine. In the early months of the war, a bill was introduced to establish Special Inspector General to oversee use of American taxpayer aid to Ukraine. So far, USAID Ukraine is the best-known oversight mechanism that exists to coordinate and oversee the disbursement of American aid. But is it potent enough to hold individuals or organisations accountable for waste, fraud or abuse of billions of dollars in aid? We do not know yet. Its major focus lies on humanitarian aid and relief packages and less on overseeing hard core military aid. Unless coordinated tightly at an interagency level across all kinds of aid from all the sources, mischief makers might exploit the cleavages.

Malefactors have been lying low under a series of reforms initiated by the Ukraine government after the Euromaidan protests in 2014. Money apart, with stocks of Soviet weapons at its disposal, Ukraine had acquired the notorious reputation of illegal arms trafficking in the early years of its independence. This issue was raised by The Washington Post  persuading the Biden administration to keep track of all the weapons being sent to Ukraine, but sadly, to not much avail. There have been worrying reports of weaponry sent to Ukraine amid the ongoing war ending up in black markets or being sold on darknet platforms. The West should not turn a blind eye.

Also read: Pope compares Ukraine war to WW2 Nazi death operation, says ‘history is repeating itself’

Awakening of Slava Ukraini

Since its independence, Ukraine has tried to weed out its legacy of corruption. Especially after 2014, the country’s anti-corruption mechanisms have developed steadily with an objective to integrate with the European Union. However, that remains an unfinished project.

What sets Ukraine apart from other members of the post-Soviet constellation is the vox populi’s desire to entrench a fair democratic system. This desire perhaps saw initial glory in the successful reinstating of popularly elected Viktor Yushchenko as the president against Kremlin backed Viktor Yanukovych. The series of protests that shook Kyiv came to be known as the 2004 Orange Revolution. The exultation, however, was short lived as Yushchenko did little to fight the menace of corruption perpetuated throughout Ukrainian polity and society right from the years of Ukraine’s first president Leonid Kravchuk and his successor Leonid Kuchma.

Presidents changed as corruption kept thriving in the country when Yanokovych made a comeback in 2010 and catapulted personal, political and legal corruption to new heights. Incidentally, the man behind his successful comeback was Paul Manafort, Donald Trump’s campaign manager, who reportedly made millions in Yanukovyh’s success.

Also read: Ukrainian embassies in European nations ‘receive bloody packages’ containing ‘animal eyes’

Euromaidan and Ukraine’s fight for dignity

The precipitating factor behind Yanokovych’s ousting was Ukraine’s efforts to sign an association agreement with the EU. While the majority population supported it, Yanukovych’s chief patron Russia did not. Eventually under Russian pressure, he backed away from the EU pact.

As the economy collapsed and poverty rose, Ukrainians were forced to fight for their dignity. A series of reforms have been underway ever since the most corrupt president, Viktor Yanukovych, in the history of Ukraine fled to Russia. Aimed at strengthening the institutions of governance, the results so far have been a mixed bag with an overall impressive progress.

One of the most promising developments has been the gas market reforms. Run by corrupt officials, Ukraine’s largest natural oil and gas company Naftogaz had largely been responsible for creating a domestic reliance on Russian-imported gas by penalising domestic gas production and discouraging efficiency. In a complete turnaround, it began reporting profits to the tune of $1 billion annually and in 2018, it accounted for 19.3 per cent of state revenue. Just before the war broke out, its profits had shot up to $12 billion in 2021.  The now efficient Naftogaz didn’t go down well with Moscow.

Russia had been isolating Ukraine by direct pipelines to Germany via the Nord Streams. It also refused to extend Russian state-owned Gazprom’s gas transit contract with Naftogaz after the current one expires.

Moreover, tax reforms in Ukraine have been aimed at eliminating “tax holes” and thereby been saving $ 1 billion for Kyiv annually. Reforms such as electronic filing for VAT ( value-added tax) have worked. Ukraine’s struggle with greater government accountability has also seen progress. Going digital, electronic system of public procurements was introduced in 2014 that has drastically reduced corruption in bidding for the country’s government contracts. Related are the banking reforms to reduce bank’s involvement in money laundering Ponzi schemes focusing on strict anti-money-laundering laws and tighter control over cash flow.

Judicial reforms, too, began in 2014 but are not sufficient to tackle the structural faults in the system. The Strategy for Reforming the Justice System from 2015–2020 was approved in May 2015 that paved the way for re-instating rule of law. It was still a work in progress when the war began.

Ukraine’s deregulations mechanisms have abolished traffic police inspectorate and the real estate registration agencies that bred corruption.
Doing away with the corrupt police system of the Yanukovych era, Ukraine has put in place the Patrol Police system that reflects striving for transparency in law enforcement mechanisms as well.

Hailed by the West, Ukraine’s President Volodymyr Zelensky’s record at fighting corruption  one of his election promises  has been a mixed bag too. Although he managed to fulfill one corruption campaign promise by lifting the law that prevented members of parliament from being prosecuted, there is much ground that needs to be covered. Zelensky’s own popularity ratings had taken a dip before the war as charges of personal corruption surfaced.

It suffices to argue that, although unfinished, Ukraine’s fight against internal corruption is a painstakingly long process of strengthening institutions, where a robust civil society will always play a cardinal role. 

Also read: Russia’s invasion of Ukraine plunged Europe into ‘biggest land war’ since WWII, says report

What should the West do?

In the absence of effective oversight mechanisms for aid and weaponry, the West’s taxpayers will forever be under the looming shadow of doubt and uncertainty. As the war stretches on with no end in sight, more money and weapons will flow to sustain Ukraine in its war against Russia. Ukraine’s internal fight against corruption, although mired in several challenges, is likely to resume as the war tattered country will be putting itself together, again with Western aid. The Ukraine war has implications for Europe, transatlantic ties and the world at large. Meanwhile, assigning a permanent Special Inspector General for Ukraine and setting up an effective interagency task force to oversee military aid should be pursued.

Taxpayers across the allied countries need a closure from US’ financial misadventures in Iraq and Afghanistan.

The writer is an Associate Fellow, Europe and Eurasia Center, at the Manohar Parrikar Institute for Defence Studies and Analyses. She tweets @swasrao. Views are personal.

(Edited by Ratan Priya)

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