Ukraine is likely to make significant progress in its institutional reform and anti-corruption agenda over the next 18 months, although resistance from a variety of local interests and increased attention to anti-corruption activities will pose various political and economic risks for Kyiv. , but also security risks, as Western war fatigue may continue to grow for other reasons. On January 9, Ukrainian Defense Minister Rustem Umerov revealed that an internal audit by ministry officials had uncovered corruption related to military procurement exceeding 10 billion “hryvnias” of the national Ukrainian currency (about $262 million), once Umerov took over the ministry in September 2023. Umerov said the audit helped recover funds that had been misappropriated by various actors, while similar extraordinary audits will prevent future corrupt procurement practices as the authorities will “respond very hard in all cases of corruption that were revealed during the actual audit.
The Minister’s revelations were the latest reminder of the direct link between the reform program and the fight against corruption in Ukraine even in the weighty issues of the country’s defense. Recognition of the urgency of reforms in Ukraine has been at an all-time high since September 25, when various Ukrainian media outlets published a list of priority reforms sent in a letter to the Ukrainian government by the US Deputy National Security Advisor for International Finance. , outlining specific reforms Ukraine’s Western donors believe the country should implement. The letter confirmed reports that the US administration is making future aid contingent on numerous mandated reforms (the most urgent related to tackling corruption) to make Ukraine more attractive to private investment and ultimately help Kiev continue its his defense against the Russians.
The aforementioned priority list of reforms was sent to the “Interagency Donor Coordination System”, which was launched in January 2023 to support Ukraine’s recovery and reconstruction. It includes representatives of Ukraine, the European Union, the countries of the Group of Seven (G-7), but also financial institutions such as the European Investment Bank, the European Bank for Reconstruction and Development, the International Monetary Fund and the World Bank.
Western governments could eventually overtly condition their military aid to Ukraine on certain reforms. The list of reforms reportedly corresponds to the confidential Ukraine version of the US State Department’s “Comprehensive Country Strategy,” a periodically produced document that serves as an official policy guide for US goals in relation to various countries. In early September 2023, US National Security Advisor Sullivan held a meeting with representatives of Ukrainian anti-corruption institutions, which was likely related to the implementation of the US strategy document, elements of which are immediately related to the Ukrainian military.
The United States wants Ukraine to reform its military and its entire Defense Department to NATO standards, for example, creating a professional officer corps in line with NATO doctrine, although the expected timeline for such an issue is reasonably unclear and will pose a significant challenge to a country at war.
On January 11, Ukraine’s National Service for Prevention of Corruption alleged that the office of Prime Minister Denys Anatolyovich Shmihal had illegally disclosed information about a whistleblower in a Ukrainian government agency, notifying the head of the competent agency of a corruption complaint. Schmihal himself is not accused of corruption. However, if Ukrainian President Volodymyr Zelensky calls for the resignation of the prime minister, it means that Kiev is willing to send a very strong message to the West that the Ukrainian government is fighting corruption, given the country’s total dependence on Western support, even and whether this comes at a greater cost of creating intra-governmental instability that could distract from, rather than help, Ukraine’s reform agenda.
Kiev has already made progress in reforms to prevent corruption related to politicians and the judicial system, while the pernicious influence of the country’s oligarchs has been significantly reduced as a result of the war. On October 17, Ukraine’s parliament passed a law establishing lifelong financial monitoring of “Politically Exposed Persons” or PEPs, which was a requirement of the International Monetary Fund. The law was also the last major obstacle to the formal start of post-EU talks on Ukraine’s accession to the European bloc, which began on December 14.
In the judicial sector, Ukraine established the “High Loyalty Judicial Commission” (HQCJ) in June 2023 to select judges and oversee further judicial reforms, along with the “Public Integrity Council” made up of civil society experts and lawyers to assist HQCJ with detailed integrity checks of judges and candidates.
At the same time, Ukrainian law enforcement authorities are increasingly scrutinizing the country’s once-powerful oligarchs. Characteristically, on September 3, Ukrainian authorities arrested Ihor Kolomoisky, the former governor of Dnipropetrovsk Oblast – one of the country’s most controversial oligarchs and a former key supporter of President Zelensky – on charges of fraud and money laundering. Since Russia launched its invasion of the country in February 2022, Ukraine’s oligarchs have seen the value of their networks plummet. They have also been forced to distance themselves from their media amid legal and economic changes brought about by the war, severely limiting their economic and political influence. But while these steps were indeed important and largely “aligned” with the demands of the US and Europe, Ukraine must now move on. To move from ostentatious prosecutions of “high-profile” persons and the establishment of new judiciary and anti-corruption bodies to the essential assurance and consolidation of the effectiveness of these institutions in the fight against corruption.
The PEP law affects thousands of public officials in Ukraine, including parliamentarians, senior political figures, judicial officials, law enforcement and defense officials, as well as top business figures, including “oligarchs” and their families. All these persons will be subject to continuous disclosures and audits of their financial data.
Ukraine began to take a tougher stance on oligarchs before Russia’s invasion, notably by passing a bill to define and limit their influence in the fall of 2021. While the bill was incomplete and partially dysfunctional, since its passage and elsewhere the power of oligarchs in the country has been limited, which has reduced the urgency for Kiev and the West to put additional legal restrictions on the influence of these businessmen. Many Ukrainian oligarchs are now under various criminal investigations, and Ukraine’s ongoing national information war telethon has rendered them unable to use media to influence politicians and public opinion. The rise of industries and other sectors that support the war with less oligarch control has also reasonably shrunk their share of Ukraine’s economy amid the decline in the value of the country’s mining and export industries, traditionally dominated by oligarchs.
Despite this progress, the United States and Europe will likely use more and more conditions to secure steady progress on reforms in Ukraine, which the West hopes will stem growing “war fatigue” at home. Progress of reforms stimulating economic activity in Ukraine, but also limiting the cost of supporting Kiev in the long term. The September 25 list of reform priorities provides essentially a more detailed description of the United States’ vision for reforms in Ukraine. In fact, it organizes the reforms according to how quickly they must be approved, describing the necessary changes in order of urgency and relative ease to occur and implement: 0-3 months, 3-6 months, one year and 18 months.
The West’s specific expectations significantly increase the pressure on Ukraine to implement reforms in the coming months, as their publication and subsequent reporting creates a de facto form of conditionality: If Ukrainian lawmakers fail to approve or effectively implement the changes, the The West could reduce support for the country, as Western governments and political forces now have a rough timetable to show that Ukraine’s reforms are ahead or behind recorded expectations.
Many people in the Ukrainian government, in the political activist community and in the general public, see the conditions set as positive, as they believe that Ukraine should also pressure the West operating in a similar evaluative way: If Kiev effectively and successfully approves the reforms, but if there are sudden and unnecessary reductions in support for the country, this will be clearly unfair on the part of the West and therefore will deal a strong blow to the reputation of Western governments, potentially spreading mistrust among other Western partners around the world. This situation, along with greater flows of private money not linked to Western governments, could help reduce the high cost of supporting Ukraine, which is fueling “war fatigue” in the West.
On September 27, the US special envoy for Ukraine’s economic recovery, Penny Pritzker, said that Ukraine’s economy has “tremendous” potential, with opportunities in all major economic sectors. However, they noted that a significant increase in private investment in the country will require steady progress in economic and other reforms.
Ukraine will likely have the fastest growing economy in all of Europe for the decade after the war finally ends, due to the inflow of funds for reconstruction and the reversal of the main effect from the initial decline in Ukraine’s GDP (by about 40% ) in 2022. But without structural reforms capable of increasing Ukraine’s stability, the country will struggle to attract private investment, preventing short-term growth, while increasing the burden on Western governments and Western taxpayers and perpetuating war fatigue in the West. Reforms are therefore absolutely necessary for the economic recovery and eventual reconstruction of Ukraine, if and when the war ends.
The Ukrainian government’s strongly political position will likely allow Kiev to push ahead unhindered with many of the reforms sought by the US and Europe, although the overall pace of reform will likely lag behind the ambitious pace set by its Western backers. Ukrainian. While public support for President Zelensky has waned somewhat in recent weeks, he remains very popular in Ukraine and opposition political forces are gaining little from their opposition to anti-corruption reforms sought by the West. In addition, Zelensky’s Servant of the People party maintains a comfortable majority in the Ukrainian parliament, meaning Kiev can likely pass reform legislation quickly if it believes its access to Western support is indeed at stake.
Therefore, over the next year, Kyiv will likely remain focused on reforms that it considers relatively easier and less likely to destabilize the country (including those that include the establishment of new oversight bodies and the appointment of new judges and prosecutors), rather than comprehensive reforms. reforms of major Ukrainian institutions, that is, reforms that could upset the population and further disrupt the country’s already war-torn economy, crushing the profits of various Ukrainian businesses and associated elites. Prioritizing these “quick wins” will also feed positive narratives about the pace of Ukraine’s reforms in the West.
However, the measures Western governments are calling for are the most ambitious structural and institutional reforms Ukraine has ever attempted, with some likely to push through to 2025 and possibly beyond the 18-month deadline. But Kiev’s Western backers are unlikely to withdraw their support quickly, as long as the delays are due to legitimate challenges uncovered during the drafting process, rather than a lack of political will to co-opt and integrate behind reform legislation.
In 2024, Kiev will likely make significant progress on reforms seen as more pressing by its Western backers. These include restructuring the boards of directors of large state-owned enterprises, strengthening anti-corruption agencies (such as the “Special Anti-Corruption Prosecution”, the “National Anti-Corruption Bureau” and the “National Service for the Prevention of Corruption”) and the further strengthening of the country’s judicial institutions (such as the “Supreme Anti-Corruption Court”, the “Supreme Administrative Court of Ukraine” and the Supreme and Constitutional Courts of Ukraine).
By contrast, Western-prioritized reforms that Kiev may delay in 2024 include liberalizing gas and electricity prices and restarting institutions tasked with regulating the country’s economy (such as the “Chamber of Accounts”, the “State Audit Service”, the “Assets Recovery and Management Organization” and the “Financial Security Office”). This is because such reforms could destabilize Ukraine’s wider economy and upset economic operators and local interests (not to mention the general population).
In 2025, Ukraine will face increasing pressure to carry out even more destabilizing reforms that include overhauling entire bureaucratic institutions and bodies. The US, for example, wants to see sweeping changes to the SBU, the country’s security and intelligence agency, as well as the Ministry of Defense, the National Police, the State Customs Service and the Border Guard Service, services that employ hundreds of thousands of Ukrainians. Reforming the SBU, which is one of the most politically and economically powerful organizations in Ukraine, will prove particularly difficult given its history of corruption and Russian influence in the spy agency, and the fact that the SBU’s importance has also increased as a result of the war . The reforms will likely seek to limit the SBU’s powers and actions in counterintelligence, counter-terrorism and cyber security, while placing limits on its involvement in other law enforcement and criminal investigations, which have left the agency vulnerable to corruption.
[The Security Service of Ukraine (Служба безпекы Україны – Sluzhba bezpeky Ukrainy) or SBU (СБУ) is the strongest law enforcement and main security-intelligence agency of the Ukrainian government, in the areas of counterintelligence, fighting organized crime and terrorism. The Constitution of Ukraine defines the SBU as a military formation and its personnel are considered military personnel with ranks. It is directly under the authority of the President of Ukraine. The SBU also operates its own Special Forces unit, the infamous “Omadan Alpha”.]
While the reforms will be met with some resistance and risk political scandals, their domestic setbacks are unlikely to decisively undermine US and EU support for Kiev in 2024, as they will not sufficiently persuade the establishment powers in the West to overrule the reasons for supporting Ukraine. Some political officials at the national, regional and local levels and aligned elements of the Ukrainian bureaucracy will oppose those reforms that they believe could affect their economic interests and security, exposing and ending corrupt practices. These forces could seek to prevent reforms at the political level or undermine reforms in their implementation, and they might even fabricate charges of corruption against reforms in an attempt to discredit reforming politicians or force them to resign so that to slow down the reform process (although this will likely be less of a concern in 2024, because the reforms Kiev pursues next year will likely threaten corrupt individuals rather than upsetting the economic interests of larger groups).
However, the reform agenda will likely lead to the publicizing of more cases of corruption — both undisputed and dubious — that opponents of reform in Ukraine believe will fuel narratives in the West that Kiev is unworthy of support, which they believe will threaten the Zelensky and other government reformers and will moderate their policy changes to avoid a sudden and decisive end to aid to Ukraine.
But corruption scandals or the slow pace of reforms are unlikely to serve as the basis for a catastrophic reduction in Western support in 2024, because political incumbents in the United States and Europe are unlikely to change their positions significantly. This year, the administration of US President Joe Biden and several leading Republicans in the House of Representatives, along with the majority of European governments, will likely prevent a decisive reduction in support for Ukraine. And the speed of reforms in Ukraine — combined with the unchanging strategic reasons underlying Western support for Kiev — will be more than enough to justify maintaining this position through the new year.
The risk of major corruption scandals capable of undermining Ukraine’s national unity and Western support will likely increase in the coming year. Zelensky and his Servant of the People party have replaced the oligarchs as the central levers of Ukraine’s political system, and the war effort has replaced the oligarchs as the center of Ukraine’s economic system. In this context, the risk of future corruption scandals involving high-ranking figures appointed by Zelensky is increasing, as relations with him and his ruling party are the primary tool through which one can exert influence and extract bribes.
Despite the growing influence of Republican politicians aligned with former US President Donald Trump, key figures in the Republican congressional delegation remain supportive of Ukraine, arguing that the Biden administration has not helped Kiev enough.
Regardless of Ukraine’s progress on reforms in 2024, some opposition political forces in the West will increasingly argue against maintaining Kiev’s support. In particular, US war fatigue will likely continue to grow, both for various strategic and political ideological reasons. Political forces opposed to Western support for Ukraine appear poised to continue gaining influence, even if they do not oust key officials or take control of policy-making in 2024. In the United States, the argument will be particularly salient that, in after all, Ukraine’s independence is a secondary strategic priority and that Washington should spend more resources on various other challenges, such as strengthening Taiwan’s defenses, ensuring the security of South Korea, or preventing escalation in the Middle East through the ongoing Israel-Hamas war.
There is no massive amount of reform or anti-corruption prosecutions in Ukraine that could immediately and reasonably convince those seeking reduced support in Kiev (such as Trump and his supporters in the US Republican Party or Hungarian Prime Minister Viktor Orbán and others marginal political forces in Europe) to suddenly change their minds. In other words, the slow but steady increase in Western-style war effort is taking place for reasons unrelated to the speed of reforms and anti-corruption activities in Ukraine, even if Zelensky’s critics often use corruption to justify the various their positions.
