It’s hardly popular to acknowledge that Ukraine, an embattled nation gripped in a valiant effort to defeat a now two-year old Russian incursion, is a sump of public corruption. But, since gaining independence in 1990, the country has ranked at or near the bottom of Transparency International’s Corruption Perceptions Index every year.
Peacetime or wartime, and despite thirty years of having been proven wrong, the United States banks optimistically on Ukraine’s reform. Over five presidential administrations in Washington and Kyiv, U.S. officials have worked with their Ukrainian counterparts to implement regulations and systems to ensure transparency and accountability in matters relating to public funds.
To be sure, Ukraine’s President Volodymyr Zelensky talks the talk of a reformer. In 2021, he signed the country’s so-called anti-oligarch law, though critics complain he uses the measure primarily to punish political rivals. Few agree Zelensky has done enough and, as Congress debates a massive aid package to help the war-torn nation survive a Russian military onslaught, many in Washington are asking if Ukraine’s notoriously unscrupulous graft could derail the country’s war efforts.
After two years of fighting, patriotism has clearly taken a back seat to profiteering. With the country struggling to provide enough energy for its people, supply its troops with bullets, or care for its war-weary citizens, Ukraine’s oligarchs continue to steal with impunity, aided and abetted by government officials who line their own pockets. The corruption takes many different forms – bid-rigging at state procurement agencies, kickbacks to public officials, payoffs to derail investigations – but one thing remains constant: each step forward is met with one, if not two, steps backwards. In the iron law of Ukrainian public sector physics, for every effective anti-corruption measure, there is an equal and opposite act of malfeasance.
On February 1, for example, officials from the National Anti-Corruption Bureau of Ukraine raided the offices of Ukraine’s largest state-owned oil and gas producer, Ukrnafta. Among the suspicions are claims reported by the Ukrainian National News Agency that the company was purchasing pipes at inflated prices leading to state budget overruns. The purported activities are being investigated to determine possible ties to billionaire Viktor Pinchuk – an oligarch who made his fortune through Interpipe Group, a steel fabrication company.
A whirlwind of accusations and dubious connections has long followed the tycoon. A 2015 Newsweek report alleged links to the Islamic Republic of Iran in violation of global sanctions imposed on the regime; Pinchuk’s father-in-law, Leonid Kuchma, led Ukraine from 1994 to 2005, a period marked by government exploitation, cronyism, and the persecution of dissidents. Over the years, he has proven adept at using his wealth to co-opt political elites in Kyiv and the West and preserving his riches through the deployment of a confusing web of shell companies to conceal his assets.
For the past two years, Interpipe has been locked in a battle royale with a Pennsylvania-based company, Vorex, over contracts to supply Ukrainian-owned oil and gas companies with drill and casing pipe. Vorex is the largest supplier of oil and gas equipment to Ukraine, but it didn’t arrive at this perch easily. The company’s experience in Ukraine is a saga of cancelled tenders, rigged bids, and harassment at border crossings that subverts the efforts of many in Ukraine to uphold the rule of law.
Last summer, Vorex won a $70 million public tender to supply drill pipe to Ukraine’s national gas company, Naftogaz. Interpipe had been disqualified from the bidding because it was either unwilling or unable to meet technical and safety standards the contract demanded. After a visit from the CEO of Interpipe, however, Naftogaz canceled the tender and revoked the contract Vorex had won fair and square.
Vorex complained to Ukraine’s Anti-Monopoly Committee, which subsequently ruled Naftogaz’s cancellation of the tender was illegal. It ordered Naftogaz to restore the contract Vorex had won but the state-owned company refused. Instead, it issued four revised tenders for the same amount of pipe. But there was a twist: The safety and technical specifications that were in the original tender had vanished, making the job ripe for Interpipe’s plucking.
As any U.S. diplomat in Kyiv will reveal, virtually every conversation between American and Ukrainian officials involves a discussion of public corruption. As President Volodymyr Zelensky defends his country from unprovoked invasion for a third year and desperately courts Western governments for military aid, he tells anyone who will listen that Ukraine is taking a hard line on corruption. But he doesn’t seem terribly serious about it. The people who Zelensky is relying on to save Ukraine and those robbing it blind are one and the same. They may be patriots, but they are also mercenaries. And as Ukraine fights a war for its survival – and begs Washington for more money – Kyiv’s oligarchs continue stealing space, placing their profit over Ukraine’s national interests. Through war and peace, the manipulation of government contracts by Ukraine’s racketeers is part and parcel of almost every public transaction.
As president, Zelensky could put an end to the dishonest dealings and endemic misconduct that have long plagued his country by enforcing the rule of law. He could seize the bully pulpit and publicly shame oligarchs who are operating openly as war profiteers. And as a faction of the U.S. Republican Party moves to derail a pending wartime aid package in Congress, Zelensky could quiet critics who argue that sending money to Kyiv is akin to throwing it down a rathole.
Yes, Zelensky could act against the oligarchs. He should. But as Congress dithers and Russia’s troops advance, time is running out. Zelensky must understand that his time in office – and perhaps Ukraine’s very existence as a sovereign nation – is utterly dependent on cash assistance from the West. But assistance for Ukraine seems to beget crookery. Be it military aid or international trade, the lesson for American investors and policymakers is clear: caveat emptor. Let the buyer beware.
