Corruption, Geopolitics, Russia & the Ukraine

Viktor Yanukovych’s involvement in politically facilitated corruption is unprecedented even in the murky annals of Ukrainian politics. From his rise to power after the Orange revolution to his demise as a result of the Maidan protests, Yanukovych and his associates bled Ukraine dry of its assets through sophisticated embezzlement schemes and seizures of state property while actively and violently suppressing any dissenting voices.




Viktor Yanukovych

The most visible example of the climate of politically motivated show trials reminiscent of the Soviet era was the trial of opposition politician Yulia Tymoshenko. Tymoshenko’s trial was opened on the 24th June 2011 and resulted in her conviction on a charge of ‘abuse of power’. The abuse that Tymoshenko was convicted of centred on her ordering of Naftogaz to sign a gas deal with Russia in 2009. She was sentenced to seven years in prison.



Yulia Tymoshenko

Tymoshenko’s conviction was widely denounced as politically motivated. It was the opinion of the EU, the United States and Russia that the allegations levelled at Tymoshenko did not constitute crimes and showed clear political motivation. The June, 2013 session of PACE called for the recognition of Tymoshenko as a political prisoner, citing the vagueness of her charges, the physical and psychological torture that she was subjected to during her detainment and the numerous procedural violations during her trial process. [Kiyv Post 2014]

PACE further articulated that the agreement that Tymoshenko had reached with Putin “...was reached in a climate of severe crisis, after Mr Putin had ordered that gas supplies to Ukraine and through Ukraine to Western Europe be cut on 5 January 2009.” The order affected Hungary, Slovakia and Bulgaria but other regions in Western Europe were also affected including Germany and France.

As such Tymoshenko made the deal with Putin under extreme stress from both Ukrainian colleagues and European Union officials. On the 22 January after agreeing to Tymoshenko’s proposals the gas supply was restored by Russia. Unsurprisingly the prosecution failed to mention the Ukrainian cabinet sign off of the deal two days later. [PACE 2014]





After the jailing of Tymoshenko, Yanukovych set about shutting down any other opposition. Media outlets that investigated Ukrainian corruption were systematically closed down or taken over by Yanukovich. Ukraine’s Forbes, Korrespondent Magazine and TVi television were all either bought or shut down.

In the case of Forbes, the Ukrainian branch of the magazine was bought by VETEK group. VETEK group is chaired by Sergei Kurchenko, an oligarch and widely loathed figure in Ukrainian national affairs. Kurchenko, along with others belong to a tight knit group of Yanukovych associates, affectionately known as ‘The Family’. Kurchenko is widely thought to be a front for Yanukovych. Amassing huge wealth from seemingly nowhere, Kurchenko is believed to have made millions from embezzling state money and widespread tax evasion.




Junior Yanukovych

Recently Arsen Avakov, Ukraine’s interior minister announced eleven criminal investigations into the VETEK group. The most serious charges relate to the importing and ‘re-exporting’ of oil in violation of tax and customs regulations. VETEK is also accused of defrauding state gas company Naftogaz. In total, Ukrainian prosecutors estimate that the VETEK group and Kurchenko embezzled over $1 billion dollars in state and company funds. [Seddon 2014]

In response to VETEK’s acquisition of Forbes fourteen of its journalists signed a collective letter of resignation in protest at the new management’s attempts at widespread censorship of their reporting. According to senior journalists at the magazine, new management informed staff of a “tiny little list” of topics that would be off limits. The inference was quite clear, according to Forbes staff, any investigations relating to the business affairs or affiliations of Kurchenko and his associates were strictly off limits. [Seddon 2014]

Despite efforts to suppress media coverage of corruption and political opposition, Yanukovych's exploits were still widely documented. As Oliver Bullough points out, one of Yanukovych's favoured methods of defrauding the Ukrainian state was embezzling funds from state budgets. The easiest method for Yanukovych was to target the State Procurement budget which was estimated at $50 billion annually. Of this $50 Billion, 30% was embezzled by Yanukovych, estimated to be a total of $15 billion annually for each of his years at the helm.

Yanukovych also siphoned off state funds by awarding government contracts to fake shell companies controlled either directly by him or his associates. In 2013 the Anti-Corruption Action Centre investigated Ukraine’s procurement market, focusing in particular on government paid prices for HIV and Tuberculosis drugs. AntAC revealed a market that was so murky that international drug companies refused to take part. The result was that ‘pseudo competitors’ as termed by AntAC were allowed to thrive. These competitor companies were established by “insiders” and members of the Ukrainian elite and run by nominees using in most cases offshore companies to complicate the identification of the true beneficiaries and to put the looted monies out of reach of any future investigations or rulings.

Prices paid by the Ministry of Health via this rigged system were one and a half to three times higher than the prevailing prices commanded for the same drugs and paid for by other organizations such as the various Ukrainian patient advocacy organizations. The study concluded that $4.9 million out of the $21.9 million spent on ARTs, 22% of the total budget in 2012 and slightly more in 2013 was embezzled out of the final budget. Only six out of the 6,500 registered pharmaceutical companies in Ukraine won contracts, all of which delivered their promised antivirals late. As the report concludes, the conduct directly”...prevent[ed] Ukraine from overcoming the epidemics of HIV/AIDS and tuberculosis, both of which have threatened the country's national security.” [Bullough 2014]

What Yanukovych did with these proceeds of crime was in part documented by the Ukrainian website yanukovychleaks.com (the website at this address does not seem to exist any longer and is redirected to ww2.yanukovychleaks.com which is a generic holding page) comprising documents seized from Yanukovych. They detail some of the money trails of the misappropriated funds. As the website pointed out, Tantalit, owned by a brother of Yanukovych's chief of staff (widely thought to be directly controlled by Yanukovych) owned many luxury properties in Kiev. These properties included luxury apartments valued at $2.86 million and a helipad built on Parkova Road estimated to be worth $3.75 million. [yanukovychleaks.com 2014]

While corruption may not be new in Ukraine, Yanucovych’s activities went far beyond simply lining his own pockets. His activities were far reaching and endemic and in many cases directly and severely compromised the future of the Ukrainian people.


References

Bullough, O. (2014). Looting Ukraine: How East and West Teamed up to Steal a Country. Institute Of Modern Russia, [online] (July 2014), pp.7-10. Available at: http://www.li.com/docs/default-source/publications/ukraine_imr_a4_web.pdf [Accessed 4 Oct. 2014].
Committee on Legal Affairs and Human Rights Keeping political and criminal responsibility separate. (2013). 1st ed. [ebook] Strasbourg, pp.15-20. Available at: http://www.assembly.coe.int/Communication/ajdoc15_2013.pdf [Accessed 2 Oct. 2014].
Kiyv Post, (2014). http://www.kyivpost.com/content/politics/fule-eu-doesnt-consider- tymoshenko-other-former-of-113148.html. [online] Available at: http://www.kyivpost.com/content/politics/fule-eu-doesnt-consider-tymoshenko-other- former-of-113148.html [Accessed 1 Oct. 2014].
Seddon, M. (2014). Forbes Embroiled In Billion-Dollar Ukrainian Corruption Scandal. Buzzfeed. [online] Available at: http://www.buzzfeed.com/maxseddon/forbes- embroiled-in-billion-dollar-ukrainian-corruption-scan#491qky3 [Accessed 3 Oct. 2014].
Seddon, M. (2014). Forbes Ukraine In Censorship Crisis After Oligarch Takeover. Buzzfeed. [online] Available at: http://www.buzzfeed.com/maxseddon/forbes- ukraine-in-censorship-crisis-after-oligarch-takeover#491qky3 [Accessed 4 Oct. 2014].
Yanukovychleaks.org, (2014). OCCRP - Yanukovych’s Real Estate Empire, Part 2. [online] Available at: http://yanukovychleaks.org/en/stories/yanukovychs-real-estate- part-2.html [Accessed 5 Oct. 2014]. (the website at this address does not seem to exist any longer and is redirected to ww2.yanukovychleaks.com which is a generic holding page) 

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