Header Ads

Breaking News

Ukraine Passes a Critical Anticorruption Bill


MOSCOW — The Ukrainian government cleared an important anticorruption hurdle Wednesday when Parliament passed a bill preventing insiders from siphoning off international aid money through bank bailouts.

The vote was seen as opening the door to International Monetary Fund lending, desperately needed for Ukraine’s nose-diving economy, and became a rare success for President Volodymyr Zelensky.

Mr. Zelensky, a former comedian elected president last year, had inspired high hopes with his commitment to weeding out corruption. But those hopes were dimmed this spring when former officials went public with accusations of backsliding and insider dealing, an old scourge in Ukraine.

The new bill opening the way for fresh lending from the I.M.F., for example, came even as courts in Ukraine ordered a state bank to pay oligarch-linked offshore companies $259 million to settle a contentious lawsuit, suggesting the money might enter one door and leave through another.

The banking bill was intended to plug some of these leaks. In a speech to Parliament, Mr. Zelensky said it was needed to “protect Ukraine’s economy” as the country negotiates with the I.M.F. for an $8 billion loan.

A major obstacle for the new bill was opposition from Ihor Kolomoisky, a banking and oil tycoon and former patron of Mr. Zelensky. The president has never made a clean break with Mr. Kolomoisky.

“Reformers worry that a revanche is underway,” toward oligarchic rule in Ukraine, Melinda Haring, the deputy director of the Atlantic Council’s Eurasia Center, wrote earlier this month of the Zelensky administration’s cautiousness in crossing the interests of Mr. Kolomoisky and other financial heavyweights.

The bill passed on Wednesday prohibits the state from returning nationalized banks to their former owners, which seemed to take direct aim at Mr. Kolomoisky.

In 2016, the Ukrainian government seized and then used a $5.5 billion bailout to prop up PrivatBank, a bank that had been co-owned by Mr. Kolomoisky. The bailout cost Ukraine more than the entire sum the state budget had received at that point from the I.M.F. after the country’s pro-Western revolution two years earlier.

Rather than trust Ukrainian courts to ensure no additional I.M.F. money vanished into Mr. Kolomoisky’s business empire, the fund requested Parliament pass the bill prohibiting any reversals of bank nationalizations through the courts. The preamble to the bill, in fact, states plainly it was passed because of “imperfections in the court system.”

But it does not close off all access to public money. When it nationalized PrivatBank, the Ukrainian Central Bank accused Mr. Kolomoisky of embezzling money from the bank by lending to so-called “related parties,” such as offshore shell companies that regulators said he and associates owned. PwC, PrivatBank’s auditor, is also contesting the central bank’s actions.

The government froze some accounts held by these companies. Now, even as Ukraine is asking for additional I.M.F. funding, Ukrainian courts have been awarding multimillion-dollar payouts to these companies and the business associates of Mr. Kolomoisky under proceedings that will not be stopped by the bill passed Wednesday, which only prohibits transfers of shares in banks.

For a poor country in pressing need of medical equipment to counter the coronavirus pandemic, the losses are significant.

The Kyiv Court of Appeals on April 15, for example, ordered PrivatBank to pay the $259 million to several offshore companies by deciding they were not, in fact, “related parties.” A company registered in the name of an ex-wife of one business associate was not related enough, the court ruled. In another instance, the court held that PrivatBank and an offshore company sharing a Cypriot lawyer was not evidence of any connection.

Critics called the ruling a whitewashing of fraud, costing taxpayers and the foreign governments that prop up Ukraine millions. “It was a money laundering machine,” Daryna Kalenyuk, executive director of the Anticorruption Action Center, said of PrivatBank.

At the same time, several former defenders of Mr. Zelensky have emerged lately to accuse his administration of insider dealing.

Oleksiy Honcharuk, a former prime minister during the first months of the administration, said he was fired because he was trying to curb corruption. And a former prosecutor general, Ruslan Ryaboshapka, wrote in a blog post that the director of Ukraine’s domestic intelligence agency, Ivan Bakanov, a childhood friend of Mr. Zelensky, had tried to block an investigation into PrivatBank.

Mr. Zelensky has said he is still dedicated to cleaning up the government but that the effort has been slowed by pushback within the bureaucracy.

The accusations against Mr. Zelensky shed some new light on one of the central points of contention during the impeachment process in the United States. Democratic lawmakers said that the Trump administration had falsely asserted it withheld military aid for Ukraine over concerns of corruption, when, in fact, it was pressuring Mr. Zelensky to investigate Joseph R. Biden Jr., now the presumptive Democratic nominee for president.

Republican defenders of Mr. Trump, on the other hand, said the administration released the aid only after it was convinced Mr. Zelensky was indeed dedicated to fighting corruption.

Maria Varenikova contributed reporting from Kyiv, Ukraine.

Source link

No comments