Business news from Ukraine

A heated debate has erupted in Ukraine over claims that the fight against corruption is used to compromise influential business people who support government reforms, The Guardian has reported.

According to the authors of the article, the recent high-profile corruption investigations into the activities of the former head of Naftogaz Andriy Kobolev, ex-general director of Boryspil airport Yevhen Dykhne and former infrastructure minister Andriy Pyvovarsky may raise broader doubts about Ukraine’s domestic political situation and its ability to effectively use billions of European funds to recover from the war.

These concerns have been expressed to the U.S. State Department and the British Foreign Office, and are shared in part by Ukrainian anti-corruption campaigns.

At the same time, the article notes that the issue of corruption in Ukraine is diplomatically sensitive, as the situation could be exploited by Russian propaganda in its own interests. In particular, this could involve such Russian narratives as the hyperbole of corruption in Ukraine or the promotion of theses that anti-corruption institutions, in the creation of which Western allies and Ukrainian civil society played a major role, are “off the rails.”

“Corruption has long been Ukraine’s Achilles heel, with the country making little progress, rising slowly on Transparency International’s Corruption Perception Index from 142nd in the world in 2014 to 122nd in 2021. Despite this, critics argue that some investigations have not focused on genuinely corrupt people, but instead have focused on businessmen who came into government to help revive Ukraine’s economy after the 2014 revolution. The question at stake is what kind of economy Ukraine will become after the war – and whether talented people will risk working for the state again,” the article stresses.

The Guardian cites the opinion of Transparency International Ukraine representative Kateryna Ryzhenko, who called, in particular, for reviewing the work of the Anti-Corruption Bureau of Ukraine.

“This is a good sign that, despite the war, the anti-corruption ecosystem is not afraid to pursue ‘big names’ and to achieve a transparent review of these cases by independent judges. However, these cases have highlighted serious problems in the work of Ukrainian anti-corruption bodies,” The Guardian quoted Ryzhenko as saying.

Also referring to an unnamed Ukrainian ex-official who “participated in the campaign to create anti-corruption bodies in Ukraine,” the authors of the article write that the officers of these bodies seem to prosecute people for violations of corporate governance rather than outright corruption.

The article also discusses various factors which, according to the authors, may cause ambiguity in the anti-corruption segment. In particular, it notes that some critics accuse Ukraine of being overzealous, driven by a desire to show the EU a positive outcome before the possible accession negotiations next year. Others accuse Ukrainian anti-corruption agencies of ineptitude or a punitive mentality that is “still shaped by Soviet mistrust of profit.

The article quotes Andriy Kobolev as saying that “there is an attempt by some to discredit Ukrainian reformers – and, by extension, the anti-corruption bodies themselves.”

The article also discusses details of the trial of Kobolev, who, according to the authors, “faces 12 years in prison if found guilty of allegedly misleading Naftogaz board members by forcing them to pay him a huge bonus in 2018.”

This cites both the position of the prosecutor’s office, which argues that the payment violated a decree limiting the bonuses of state-owned enterprise managers and accuses Kobolev of misleading the Naftogaz board, and Kobolev himself, who denies any wrongdoing, stating that he warned the board about the decree, but an independent legal adviser said that the board had the exclusive right to decide on bonuses.

The article cites Kobolev’s counterargument that “the size of his bonus was determined not by him, but by the supervisory board. It goes against all the rules of corporate governance when the head of a company determines his own remuneration,” as well as the opinion of Claire Spottiswood, a former British gas regulator and former chair of Naftogaz’s supervisory board, who said that the board unanimously approved the bonus after receiving legal advice. In a statement she signed along with two other former supervisory board members, Spottiswood said that “it was a brave act of leadership on Kobolev’s part to take on an astoundingly successful case” that many thought was unwinnable. She also claims that she “never gave an interview to the NABU.”

Mark Savchuk, head of the civilian body that oversees the agency’s anti-corruption work, also criticized the NABU, telling the Kyiv Post newspaper, “The Ukrainian company received $4.6 billion, so no damage was done. These additional funds were then invested in Naftogaz’s infrastructure or paid to the state in the form of dividends. To say that the person who achieved this did it in a corrupt way is strange. In my opinion, the law enforcement agencies are making a mistake”.

Although, as the authors of the article acknowledge, Kobolev’s award “may be morally questionable,” they also appeal to the fact that “during his time at Naftogaz, he transformed the company from a failure into one that provided 15 percent of all Ukrainian state revenue,” and that “after the war began, he used his knowledge of the Russian gas industry to push for tougher sanctions against Moscow, as acknowledged in a letter written in his defense by John Herbst, the former US Ambassador to Ukraine.”

In addition, according to The Guardian, Kobolev is “not the only businessman caught up in this conflict. The second court case cited in the article is the case of Yevhen Dykhne, who, according to the authors, “was sentenced to five years in prison for leasing premises at Boryspil airport to private businesses, such as stores and cafes, without using the state competitive selection process, which would have taken two years.”

The article notes that Yevhen Dykhne himself “did not receive any personal benefit, but the court ruled that only the state has the right to lease the property and calculated that Dykhne’s actions resulted in a loss to the state of 15.7 million hryvnia.” Dykhne himself calls his verdict “worthy of Kafka.

The third high-profile trial mentioned in the article was the case of former Minister of Infrastructure Andrei Pivovarsky, who, according to the authors, “is accused of depriving the state of $30 million by deciding in 2015 that only half of the port fees at the Yuzhny seaport on the Black Sea should go to the Ukrainian Sea Ports Authority.

At the same time, the article quotes Pivovarsky himself as saying that the other half should go to private companies on the condition that they would reinvest the money received in maintenance and that his goal was to make the port more efficient.

The Guardian also notes that Pivovarsky was in charge of deregulating the Ukrainian economy at the time, and according to him, he notified the Justice Ministry about the reforms. He is not accused of receiving private benefits, but the NABU insists that only a state-owned company has the right to collect port fees.

The newspaper also quotes Pivovarsky’s recent Facebook post: “Only now I realized the price of my sincere desire to change the country for the better. I apologize to my wife and children for what they have gone through with me.”

Finally, The Guardian notes that the NABU “did not respond to a request for comment for this article.”

However, it notes that “critics (of the anti-corruption bodies – ed.) admit that some businessmen walk a fine line between showing initiative and abuse of office. But they warn that Ukrainian prosecutors distort the essence of financial crimes”.

“If someone doesn’t figure it all out, Ukraine may find that it gloriously won the war, and then find that it lost the world,” the authors of the article state.

On May 18, the Supreme Court of Ukraine started considering the appeal of the ex-general director of Boryspil Dykhne against the court’s sentence of five years in prison.

https://ru.interfax.com.ua/news/general/900950.html