News / Europe

    Kleptocracy at the Root of Ukraine's Problems

    Ukraine's fugitive President Viktor Yanukovych gives a news conference in Rostov-on-Don, Friday, Feb. 28, 2014
    Ukraine's fugitive President Viktor Yanukovych gives a news conference in Rostov-on-Don, Friday, Feb. 28, 2014
    Ukraine is caught in the middle of political turmoil in the wake of the departure of President Viktor Yanukovych. It is also beset with the aggression shown by Russian President Vladimir Putin, whose forces have effectively taken control of Ukraine’s Crimea region.  And in the middle of this is what the civil watchdog group Transparency International is calling “Ukraine’s revolution against corruption.”

    Many things caused Ukrainians to rise up in protest over the past several months.  Dismay at seeing Yanukovych embrace Russia instead of the European Union had a big part. But so did a collective revulsion against the profound corruption of Yanukovych and his inner circle.

    Nothing epitomizes the excesses of Viktor Yanukovych more than his palatial estate, Mezhyhirya.  The massive house and its 137 hectare estate on the Dnieper River outside Kiev have been valued at more than $75 million (US). And, The New York Times says Yanukovych has recently been building yet another mega-mansion at Laspi, on the shore of the Black Sea near Sevastopol.

    When Yanukovych served as Prime Minister in 2006, he lived at and engineered the privatization of Mezhyhirya. Then, when Yanukovych became President of Ukraine in 2010, he reportedly had the deed to the estate registered in the name of several European companies. And, he built the estate’s present-day baronial log castle.

    Yanukovych’s tastes appeared to be as lavish as Iraq’s Saddam Hussein. Each of the mansion’s Lebanese cedar doors cost $64,000, according to Sergii Leshchenko, deputy editor-in-chief of Ukrainska Pravda. Three sets of wooden paneling for staircases, he says, came in at $200,000. Leshchenko says that in the course of one and a half years the overall cost of fittings imported for Mezhyhiriya was $9,416,000.

    The shuffling of ownership deeds has continued along with the lavish upgrading of the estate. Mezhyhiriya is now officially owned by “Tantalit,” a company in the Ukrainian city of Donetsk.  That, in turn, is a subsidiary of an Austrian concern, which in itself is 100% owned by a British company. To observers, it’s all a “shell game” to obscure Yanukovych’s assets.

    At least Mezhyhiriya and the new mansion in Lapsi are physical property that the state can take over.  A more daunting challenge is the recovery of assets that have moved overseas into disguised corporations and secret bank accounts.

    The U.S. Treasury Department has put out an advisory to banks telling them to beware of activity involving accounts held by Yanukovych and his inner circle. Switzerland, Lichtenstein, and Austria have frozen accounts held by Yanukovych and some 20 of his inner circle.

    As for the United Kingdom, Transparency International UK Executive Director Robert Barrington has sent a letter to British Chancellor of the Exchequer George Osborne stating that “Financial services providers, professional service firms, and other at-risk sectors in the UK have a critical role to play at this time to ensure that suspicious corrupt assets are not laundered into and through the UK.”

    Transparency International – Ukraine Executive Director Oleksii Khmara told the Guardian newspaper on February 25 that there is plenty of western culpability here.  “The Ukrainian elites,” Khmara says, “have, for years, salted away ill-gotten gains throughout the EU while the authorities, specifically in the UK, Germany, Austria, the Netherlands, Switzerland and Latvia, failed to apply their anti-corruption and anti-money laundering legislation to stop them.”

    The Kiev-based independent “Anti-Corruption Action Center” is also calling for the freezing of Yanukovych-related bank accounts.  Along with the departed president and his son Oleksander, the Center also targets Yanukovych insiders Andriy and Serhiy Kliuyev, who own more than 70 Ukrainian concerns through the shell of two Austrian holding companies. In recent days, Andriy Kliuyev served as Yanukovych’s chief of staff and was reportedly wounded. 

    Another “insider” the Center wants to confront is Oleksandr Yefremov, who has been Chairman of the Party of Regions, Yanukovych’s party, in Ukraine’s parliament since 2012. His financial assets are organized under a U.S. incorporated entity called TBM Holdings, with a subsidiary in the British Virgin Islands.  Yefremov also controls a group of industrial entities that profit from government tenders in the Luhansk Region of Ukraine.

    Anders Aslund, with the Washington-based Peterson Institute for International Economics, says Yanukovych and his so-called “family” of insiders have siphoned off enough to equal the $30 billion deficit Yanukovych has run up since taking office in 2010. He says there were three areas being exploited – Ukraine’s State Tax Administration and its Customs Committee, from which as much as $5 billion a year was being embezzled.  A second area was state infrastructure projects, which he says cost twice what they should – enabling the excess to be illicitly banked. The third sector, is the state oil and gas company Naftogaz. Aslund says it buys natural gas at an artificially low price, and then resells, with the difference put in the pockets of the “family.”

    For Ukraine, the challenge going forward is to build a new system of anti-corruption controls – and sticking to them – to lift the state out its ranking as 144th out of 177 countries in 2013 according to Transparency International. 

    Standing in the way of that, according to George Friedman, Chairman of intelligence aggregator Stratfor, is the continuation of official greed.  “The Yanukovych government was rotten to the core,” Friedman states, adding “but most governments of Ukraine will be rotten to the core, partly because there is no tradition of respect for the law, and because of the way property was privatized [when Ukraine became independent.]”  Friedman says the oligarchs who bought up everything for sale “now own Ukraine, and however much the crowd despises them, it can’t unseat them.” He says these people “can eliminate their critics or bribe them into silence.”

    Transparency International – Ukraine says it wants lawmakers to immediately establish an anti-corruption infrastructure with independent policy and enforcement bodies. TI says it disagrees with the present proposal to create deputy ministerial posts focused on fighting corruption, asserting that such individuals would not have the needed independence, mandate, and the tools to fight corruption.

    As a new government is formed, and people run for offices, Transparency says candidates must make their property, income, and expenditures public, along with their financial obligations, so that society can evaluate the possible integrity risks of candidates.

    And, to further control corruption in Ukraine, TI is pushing for parliament to enact new laws on conflicts of interest. It also calls for an open public procurement system in Ukraine’s ten largest cities.

    Meanwhile, Yanukovych has resurfaced in the Russian city of Rostov-on-Don, and has been recognized by President Putin as still being Ukraine’s legitimate leader.  The Russian president says a written request by Yanukovych for military assistance has been acted upon, giving his excursions into Crimea a veneer of legitimacy.

    But Transparency International’s Ukraine chapter is also calling for the strongest possible actions against Russia over its taking control of Crimea. TI – Ukraine is urging the EU, the United States, NATO, and the Organization for Security and Cooperation in Europe to immediately consider providing military assistance to protect the territorial integrity of Ukraine. It is also calling on the international community to immediately apply economic sanctions against Russia, something a number of EU member states are pressing for.

    Jeffrey Young

    Jeffrey Young is a Senior Analyst in VOA’s Global English TV.  He has spent years covering global strategic issues, corruption, the Middle East, and Africa. During most of 2013, he was on special assignment in Baghdad and elsewhere with the Special Inspector General for Iraq Reconstruction (SIGIR).  Previous VOA activities include video journalism and the “Focus” news analysis unit. He also does journalist training overseas for VOA.

    You May Like

    In Britain, The Sun Still Doesn’t Shine

    Invoking Spitfires and Merlin, Leave voters insist country can be great again, following surprising 'Brexit' vote last week

    Double Wave of Suicide Bombings Puts Lebanon, Refugees on Edge

    Following suicide bombings in Christian town of Al-Qaa, on Lebanon's northeast border with Syria, fears of further bombings have risen

    US Senators Warned on Zika After Failing to Pass Funding

    Zika threats and challenges, as well as issues of contraception and vaccines, spelled out as lawmakers point fingers

    This forum has been closed.
    Comment Sorting
    Comments
         
    by: eManuel from: Romania
    March 09, 2014 3:44 AM
    Ukraine is under a kleptocracy, indeed ! But you people (of the old US of A) are ruled by a NARCOKLEPTOCRACY, whose military were sent to Afghanistan for the sole purpose of guarding the poppy fields there !

    by: Anonymous
    March 05, 2014 4:30 AM
    Dear Mr Young,

    Please write a similar article about the new oligarchs who are in power right now in the Ukraine so that the VOA readers see the difference beetween these opposing forces in the country.

    by: JKF2 from: GREAT NORTH(Canada)
    March 04, 2014 12:35 PM
    Once again, on this Ukraine crisis, we see serious divisions in the Western block, against taking collective and unified action; and this was also observed in the Mali undertaking, by the French gvmt. The French gvmt undertook Mali ops, to stop the terrible acts being committed by terrorists against ordinary people, again the same dividers were vocal; and as we have seen in responses to other bad events, (Georgia, Hezbollah, etc) division is the norm of the day.

    The principal divider, in my view, as usual is Ms Merkel, the Chancellor of Germany. It is very hard to understand, as to why she always opens the chiasam of the Western position; it seems she usually undercuts the position of most of the other allies in NATO. When a major crisis occurs, especially if the intention is to de-escalate the crisis rapidly, the number one deterrent value is unity.

    Ms Merkel's open unwiligness to tow the NATO alliances positions, in my view are extremely negative to strategic interests. Much of this type of opposition, to US and other members of the Alliance, will cause countries to take isolationist positions. It is difficult to understand as to why such divisions, are not addressed in camera, and a unified position is expressed. Countries in an alliance, can't expect, that a few of them carry all the political and diplomatic load, all the time.

    An alliance in which members do not want to share the diplomatic and political load, is in fact much less effective, and it could even be counterproductive. Adversaries, on their risk calculations, observe unity, lack of unity=lack of will- it emboldens their actions. It is my perception/opinion, but Ms. Merkel does not seem to appreciate the need for unity, and the value of unified political and diplomatic position in a crisis situation!
    In Response

    by: Anonymous
    March 05, 2014 7:23 AM
    How is Ms Merkel being a divider relevant to the article?

    Anyway, somebody must take care that a unity does not become one's property.
    In case of the latest crisis she did not feel it appropriate to join that boyscouts bawling from overseas... and unlike the boyscouts, she is a head of a country that depends on stability in the region.
    In Response

    by: Thomas Dohling from: New Delhi, India
    March 05, 2014 2:37 AM
    Objectively accurate observation.

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Slow Rebuilding Amid Boko Haram Destruction in Nigeria’s Northeasti
    X
    June 29, 2016 6:15 PM
    Military operations have chased Boko Haram out of towns and cities in Nigeria’s northeast since early last year. But it is only recently that people have begun returning to their homes in Adamawa state, near the border with Cameroon, to try to rebuild their lives. For VOA, Chris Stein traveled to the area and has this report.
    Video

    Video Slow Rebuilding Amid Boko Haram Destruction in Nigeria’s Northeast

    Military operations have chased Boko Haram out of towns and cities in Nigeria’s northeast since early last year. But it is only recently that people have begun returning to their homes in Adamawa state, near the border with Cameroon, to try to rebuild their lives. For VOA, Chris Stein traveled to the area and has this report.
    Video

    Video Clinton Leads Trump, But Many Voters Don't Like Either

    In the U.S. presidential race, most recent polls show Democrat Hillary Clinton with a steady lead over Republican Donald Trump as both presumptive party nominees prepare for their party conventions next month. Trump’s disapproval ratings have risen in some recent surveys, but Clinton also suffers from high negative ratings, suggesting both candidates have a lot of work to do to improve their images before the November election. VOA National correspondent Jim Malone has more from Washington.
    Video

    Video New US Ambassador to Somalia Faces Heavy Challenges

    The new U.S. envoy to Somalia, who was sworn into office Monday, will be the first American ambassador to that nation in 25 years. He will take up his post as Somalia faces a number of crucial issues, including insecurity, an upcoming election, and the potential closure of the Dadaab refugee camp in Kenya. VOA’s Jill Craig asked Somalis living in Kenya’s capital city Nairobi how they feel about the U.S. finally installing a new ambassador.
    Video

    Video At National Zoo, Captivating Animal Sculptures Illustrate Tragedy of Ocean Pollution

    The National Zoo in Washington, D.C., is home to about 1,800 animals, representing 300 species. But throughout the summer, visitors can also see other kinds of creatures there. They are larger-than-life animal sculptures that speak volumes about a global issue — the massive plastic pollution in our oceans. VOA's June Soh takes us to the zoo's special exhibit, called Washed Ashore: Art to Save the Sea.
    Video

    Video Baghdad Bikers Defy War with a Roar

    Baghdad is a city of contradictions. War is a constant. Explosions and kidnappings are part of daily life. But the Iraqi capital remains a thriving city, even if a little beat up. VOA's Sharon Behn reports on how some in Baghdad are defying the stereotype of a nation at war by pursuing a lifestyle known for its iconic symbols of rebellion: motorbikes, leather jackets and roaring engines.
    Video

    Video Melting Pot of Immigrants Working to Restore US Capitol Dome

    The American Iron Works company is one of the firms working to renovate the iconic U.S. Capitol Dome. The company employs immigrants of many different cultural and national backgrounds. VOA’s Arman Tarjimanyan has more.
    Video

    Video Testing Bamboo as Building Material

    For thousands of years various species of bamboo - one of the world's most versatile plants - have been used for diverse purposes ranging from food and medicine to textiles and construction. But its use on a large scale is hampered because it's not manufactured to specific standards but grown in the ground. A University of Pittsburgh professor is on track to changing that. VOA’s George Putic reports.
    Video

    Video Orphanage in Iraqi City Houses Kids Who Lost their Parents to Attacks by IS

    An orphanage in Iraqi Kurdistan has become home to scores of Yazidi children who lost their parents after Islamic State militants took over Sinjar in Iraq’s Nineveh Province in 2014. Iraqi Kurdish forces backed by the U.S. airstrikes have since recaptured Sinjar but the need for the care provided by the orphanage continues. VOA’s Kawa Omar filed this report narrated by Rob Raffaele.
    Video

    Video Re-Opening Old Wounds in a Bullet-Riddled Cultural Landmark

    A cultural landmark before Lebanon’s civil war transformed it into a nest of snipers, Beirut’s ‘Yellow House’ is once again set to play a crucial role in the city.  Built in a neo-Ottoman style in the 1920s, in September it is set to be re-opened as a ‘memory museum’ - its bullet-riddled walls and bunkered positions overlooking the city’s notorious ‘Green Line’ maintained for posterity. John Owens reports from Beirut.
    Video

    Video Brexit Resounds in US Presidential Contest

    Britain’s decision to leave the European Union is resounding in America’s presidential race. As VOA’s Michael Bowman reports, Republican presumptive nominee Donald Trump sees Britain’s move as an affirmation of his campaign’s core messages, while Democrat Hillary Clinton sees the episode as further evidence that Trump is unfit to be president.
    Video

    Video NASA Juno Spacecraft, Nearing Jupiter, to Shed Light on Gas Giant

    After a five-year journey, the spacecraft Juno is nearing its destination, the giant planet Jupiter, where it will enter orbit and start sending data back July 4th. As Mike O'Sullivan reports from Pasadena, California, the craft will pierce the veil of Jupiter's dense cloud cover to reveal its mysteries.
    Video

    Video Orlando Shooting Changes Debate on Gun Control

    It’s been nearly two weeks since the largest mass shooting ever in the United States. Despite public calls for tighter gun control laws, Congress is at an impasse. Democratic lawmakers resorted to a 1960s civil rights tactic to portray their frustration. VOA’s Carolyn Presutti explains how the Orlando, Florida shooting is changing the debate.

    Special Report

    Adrift The Invisible African Diaspora