Corruption in Ukraine

Persistent Problem with Significant Improvements

Photo by Jp Valery on Unsplash

Transparency International (TI) last week released its 2023 Corruption Perceptions Index (CPI), and the news is not great. Corruption is thriving all over the world, according to TI, and more than two-thirds of countries score below 50 out of 100, with the global average stuck at only 43. Twenty-three countries fell to their lowest scores to date this year, and the vast majority of countries in the world have made no progress in their fight against corruption.

Now before I get to some bright spots in this latest report, I will point out that the CPI is one tool in a robust toolbox that can help determine risk. The CPI provides insights into jurisdictional risk of transacting with countries known for corruption and can help inform risk decisions about whether to transact in a given country. It can provide insight into just how prevalent corruption is and whether customers or business partners could be involved.

When the CPI is published, we should pay attention. As I wrote a year ago, corruption was one of the factors that led to Russia’s invasion of Ukraine in 2022, and it’s only getting worse, as Russia dropped to its lowest score in the CPI in 2023.

The Biden administration in 2021 rightly identified corruption and kleptocracy as core national security interests. Not only did corruption enable the increased authoritarianism and aggression that led Russia to invade Ukraine last year, but Russia has been bribing corrupt politicians all over the globe for years, using money and prestige as a soft power lever to attain its foreign policy goals.

But what about Ukraine? Ukraine has had a bad reputation since gaining its independence in 1991, but recent indicators suggest that the country not only has increased its efforts to root out corruption, but Kyiv is doing so in the middle of an ongoing war Russia has waged for nearly two years.

Indeed, the 2023 CPI has shown that Ukraine has improved yet again, adding three points to its score from the year before and scoring 36/100 and ranking 104th out of 180 countries. This may not seem great, and compared to some more developed democracies, it’s still pretty low. However, Ukraine continues to improve

A country’s score is the perceived level of public sector corruption on a scale of 0-100, where 0 means highly corrupt and 100 means very clean.

A country's rank is its position relative to the other countries in the index. Ranks can change merely if the number of countries included in the index changes.

The rank is therefore not as important as the score in terms of indicating the level of corruption in that country.

For Ukraine, the battle is critical, both for its hopes for EU membership and for its NATO aspirations. That’s one reason why Kyiv is working so hard to revamp its justice system and root out oligarchy and kleptocracy. And although skeptics of assistance to Ukraine have been pointing to the country’s ongoing issues with transparency, corruption, and rule of law, they don’t like to examine the improvements.

• The World Justice Project’s Rule of Law Index, which includes factors like absence of corruption, having an open government, and constraints on government powers, ranks Ukraine 89th out of 142 countries analyzed—ahead of Turkey, Belarus, and Russia, which ranked 113th.

• President Zelensky was elected in 2019 largely on a promise to root out corruption, and Ukraine has made major steps to build an anticorruption infrastructure. The country now has an anticorruption bureau (NABU), a special anticorruption prosecutor (SAPO) and court, and a national agency on corruption prevention (NACP). All of these institutions were established with strong support of international community, including the US government, according to presidential advisor Serhiy Leschenko.

• Undersecretary of Defense for Policy Colin H. Kahl last year told the House Armed Services Committee that military systems provided to Ukraine by the United States include tracking, such as scanners and software, as well as remote visits to sites when conditions permit, to help ensure that the weapons systems are not diverted.

• The US Senate in mid-December passed an initiative to establish a Special Inspector General (IG) for Ukraine as part of the annual National Defense Authorization Act that would oversee the humanitarian, economic and security assistance funding to the country and ensure that the funds are appropriately spent. The Defense Department IG last month reported that the Pentagon has not fully complied with enhanced tracking requirements for roughly $1 billion worth of equipment sent to Ukraine. Most of the improperly tracked equipment is night vision devices, but also drones and missiles. But again, the IG did not find any instances of misuse or diversion.

• President Zelensky in September replaced Ukraine’s Defense Minister Oleksii Reznikov amidst efforts to fight corruption in his government and inside the military, in an effort to prove Ukraine deserving of continued aid. This is an indicator that the President is holding even his highest-level officials accountable for mismanagement on their watch. The head of the Ukrainian Supreme Court is being prosecuted for bribery, and one of Ukraine's most powerful oligarchs, Ihor Kolomoisky, in September was arrested on charges of money laundering and fraud.

That’s quite the progress for a country that was called out by the Guardian as “the most corrupt country in Europe” in 2015. “Ukraine’s growth by three points” in the 2023 CPI, “is one of the best results over the past year in the world,” TI noted in its report on Ukraine a few days ago.

• The report notes that more than 100 criminal proceedings were initiated against 257 persons, who were served with a suspicion notice by the NABU and the SAPO from January 1 to December 31, 2023.

• 100 indictments against 233 people were referred by the NABU and the SAPO to the High Anti-Corruption Court (as of December 31, 2023).

• The High Anticorruption Court last year imposed 65 sentences last year, convicting 83 people and acquitting six. The convictions included an ex-judge and an ex-prosecutor, as well as an ex-mayor and former Minister of Ecology Mykola Zlochevskyi.

Is Ukraine’s anticorruption fight over? Hardly. The country still has a long road ahead of it. That said, there are plenty of countries on the CPI that score lower than Ukraine and still receive US aid, and Ukraine is one of the very few countries in the world that has improved its score, while the vast majority of countries have made no progress or declined in the last decade.

The United States continues to push Ukraine to continue fighting corruption. The State Department last summer issued a demarche to Kyiv, stressing that the United States expects Ukraine to continue pursuing anticorruption and financial transparency efforts in order to keep receiving direct budget support, according to a report from CNN.

The demarche also emphasized the need for Ukraine to implement critical reforms under Ukraine’s International Monetary Fund program, including those related to anti-money laundering/countering the financing of terrorism (AML/CFT), a source familiar with the matter said.

And Ukraine has confirmed that it has initiated additional efforts to implement reforms.

So yes, corruption in Ukraine is a continuing and historical problem, but it’s a problem against which Kyiv is fighting daily, even in the midst of Russian attacks that are murdering thousands of civilians and engaging in genocide in an effort to erase the Ukrainian identity from this earth.

Against a backdrop of violence and international pressure, I’d assess Ukraine is doing pretty well at fighting this persistent challenge.