Soon after Russia invaded Ukraine, a former US government official visited Kiev to inquire how he could help to supply humanitarian aid to the people on the front line. He had formed a non-profit agency, raised $2 million and provided over 70 ambulances to help Ukrainian soldiers and citizens. But during his visit he was shocked to learn about the high level of corruption.
‘Sanctioning successful companies should not be done to clear out competitors or punish someone you don’t like’
While driving to Nikolaev, George Tuka, a former deputy minister, briefed him on how corruption was endemic and intractable in Ukraine. ‘I don’t believe you’, replied the former official, who had received high honours for his humanitarian work during the war. ‘You’re just saying that because you are a political opponent of Zelensky.’ But during his next visit the American, a former senior official in the US Agency for International Development, was sitting in the car with Tuka when the radio announced the then head of the Ukrainian Supreme Court, Vsevolod Kniaziev, had been arrested and detained on suspicion of taking a bribe (Kniaziev’s trial has not yet taken place and he denies any wrongdoing). Tuka was furious and swore loudly. The American then understood and accepted corruption could not be ignored just because Ukraine was being invaded by Russia.
Corruption remains a problem in Ukraine, especially regarding sanctions. ‘Corruption in Ukraine is unprecedented’, Tuka told me. Western readers will be surprised to learn that at least 17 Ukrainian companies and at least 1,611 citizens have been sanctioned by the Ukrainian government. The precise figures are not available because the nationality of those sanctioned are not listed. ‘Nobody’s safe’, says Julia Kiryanova, CEO of Smart Holding, an investment conglomerate, which has been targeted and subjected to police raids, seizure of assets and criminal charges on vague national security grounds. She claims that sanctions are used to force a fire sale of profitable firms which will be exploited by politically connected Ukrainian businessmen to enrich themselves. This redistribution of corporate assets under the guise of sanctions and the absence of the rule of law is eerily reminiscent of the notorious privatisation of state assets in Russia in the 1990s. ‘New Oligarchs will appear soon’, said Kiryanova.
Two weeks ago the head of Ukrainian alcohol producer Global Spirits was notified that he is being investigated for ‘assisting the aggressor state’ by buying alcohol from Russia. Its founder and owner Yevhen Cherniak strongly denies the allegations and says he has absolutely nothing to do with the companies mentioned in the indictment. ‘I hope this is a mistake rather than an attempt to pressure business with the goal of a raiding attack on the market leader’, he said.
The controversial policy by Ukraine to sanction its own people and companies is highly controversial and unprecedented. ‘When I worked in government, sanctions were only imposed against foreigners not its own citizens’, said Tuka, who is a strong critic of the new law. ‘Ukraine should not sanction its own people and companies.’
The former minister says that there are three flaws. Firstly, the information on which the decision to sanction an individual is compiled by the Ukrainian Security Service, the SBU. Secondly, some members of the SBU are corrupt and so they are not acting objectively. Thirdly and most importantly, the evidence is classified. ‘The problem is the materials provided by the SBU on which to sanction someone is a state secret’, said Tuka. ‘And so the sanctioned person or company cannot challenge the case against them or appeal like a normal legal action because they do not have access to the documents. Technically they can go to the courts, but this legal action can take many years and by that time their business is completely destroyed.’
This process allows a politically connected businessman to expropriate a company or remove a competitor from the market for at least half a year while the owners challenge the decision to sanction them. And the absence of due process and the rule of law undermines Ukraine’s justification of their defence against Russia’s illegal invasion. ‘No previous administration has accumulated so much power and because of the war, it is untouchable in the eyes of the international community and the media’, said a Ukrainian corporate executive. ‘Sanctioning successful companies should not be done to clear out competitors or punish someone you don’t like.’
The role of the SBU in the decision to sanction an individual or company is a problem because some of its officers are pro-Russian, according to Viktor Yagun, former chief of the SBU’s counter-intelligence unit. ‘When the Soviet Union collapsed in 1990, almost 90 per cent of the SBU were in the KGB’, he told me. ‘The problem was Ukraine only gradually removed the pro-Russian elements. And so, by 2014 when Russia was a threat to Ukraine, some SBU officers did not believe this threat and were tolerant of Russia.’ This was confirmed by Alexey Danilov, the National Security Advisor: ‘We made a big mistake in 1991 when we didn’t close down the KGB in Ukraine but just changed its name to the SBU and the cancer of the KGB remained.’ Tuka is even more direct: ‘KGB agents are still in senior positions in the SBU.’
While Zelensky, as head of the Council of National Security, makes the final decision to sanction a Ukrainian citizen or company, the input of the SBU is crucial and decisive. ‘The SBU is directly engaged in the sanctions process because it concerns people who are collaborating with Russia,’ said Yagun. As the SBU has been infiltrated by Russian intelligence agents and some officers are corrupt, this damages the credibility of the process because the evidence for the decision to sanction is tainted. And so former ministers like Tuka believe the SBU should not investigate corruption and instead focus on threats to national security.
For Tuka the primary flaw is the unfair judicial process for Ukrainians who have been sanctioned: ‘Imagine your Prime Minister Rishi Sunak declaring on the BBC that Boris Johnson is the biggest criminal in the UK, and we must arrest him, take all his money and property without a trial. This is not how the legal system should work. If President Zelensky says someone is the biggest criminal in Ukraine it should be confirmed by proof and in the courts and sanctions are not the answer.’
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