Unveiling Ukraine's Battle with Corruption: Escalating Pressure from the US

The US has been urging Ukraine to make greater efforts in combating government corruption. In recent weeks, multiple US officials have informed CNN that certain types of US economic assistance will be contingent upon Ukraine's progress in reforming its institutions. Despite this, the Biden administration's commitment to supporting Ukraine's military remains strong. However, officials have recently made it clear that other forms of US aid may be at risk if Ukraine fails to take further steps in addressing corruption.

Congress has yet to approve the administration's request for an additional $24 billion in funding for Ukraine. Some Republicans are hesitant to allocate such a large sum without stringent oversight and conditions. A US official familiar with the situation informed CNN that the message to Ukraine has consistently emphasized that any misuse of these funds puts all US aid to the country at risk.

In late summer, the State Department sent a formal diplomatic note, referred to as a demarche, to Ukraine. According to three officials familiar with the matter, the note emphasized the US's expectation for Ukraine to persist in their anti-corruption and financial transparency efforts in order to receive continued direct budget support. This information has not been previously reported.

According to data from the Congressional Research Service, the US has provided Ukraine with over $23 billion in direct budget support since the start of the war. This financial aid, separate from military assistance, enables Ukraine to provide essential services to its citizens, including emergency first responders, healthcare, and education. The funds are administered by the United States Agency for International Development (USAID) through the World Bank to the Ukrainian Ministry of Finance.

According to a knowledgeable source, the demarche highlighted the importance of Ukraine enacting crucial reforms through its International Monetary Fund program. These reforms specifically pertain to anti-money laundering and countering the financing of terrorism (AML/CFT). The Ukrainian embassy in Washington stated to CNN that Ukraine has demonstrated ambitious efforts in implementing reforms, including within its IMF program.

"We are grateful for the assistance and support provided by the US, EU, and other friendly nations in implementing the reforms initiated by Ukraine. The practical support extended to our Cabinet of Ministers, National Bank of Ukraine, General Prosecutors office, and anticorruption agencies is highly valued. Ukraine fulfills all its obligations with the IMF, EU, and other international donors, as well as the USA.

The administration has consistently expressed its commitment to supporting Ukraine in combating corruption during its conflict with Russia. However, there have been increased private diplomatic discussions concerning this issue in recent weeks due to uncertainties surrounding the approval of the administration's funding request for Ukraine by Congress."

Last month, National Security adviser Jake Sullivan had a meeting with a delegation of Ukrainian anti-corruption officials to discuss their ongoing efforts. Additionally, Secretary of State Antony Blinken addressed the issue with Ukrainian President Volodymyr Zelensky during his visit to Kyiv in early September. State Department spokesperson Matthew Miller stated on Monday that he would not provide specific details about the conversations. However, Miller emphasized that combating corruption remains a top priority for both the United States and Ukraine. He mentioned that the US has been actively engaging with their Ukrainian counterparts, requesting specific actions to address corruption. Miller also highlighted that Ukraine has already taken responsive measures to these recent requests.

White House has drafted a list of reforms

The initial report about the draft was made by Ukrainska Pravda and it was subsequently shared with both the US embassy in Kyiv and members of the Donor Coordination Platform. This platform was established in January to enhance coordination of international financial support for Ukraine. It's important to note that the implementation of these reforms is not a prerequisite for receiving military aid, as clarified by a US official. The US embassy in Kyiv further stated that the list was shared to serve as a foundation for discussion with the Ukrainian government and essential partners. This initiative is part of the ongoing commitment of the United States to support Ukraine and its aspirations to integrate into Europe, which is a goal strongly endorsed by the US.

The White House document provides a timeline of recommended changes for Ukraine, specifying three-month, six-month, one-year, and 18-month intervals.

Several of the suggestions align with requirements for EU membership and benchmarks set by the IMF. These include measures such as bolstering the authority of the Specialized Anti-Corruption Prosecutors Office, improving the autonomy of supervisory boards overseeing state-owned companies in Ukraine, and implementing reforms to the constitutional court.

"Revamping the energy sector, which has long been plagued by corruption and oligopoly, is crucial for solidifying Ukraine's European integration," stated a strategy memorandum for Ukraine issued by the State Department and posted on their website in August.

The memorandum further emphasized that Ukraine must ensure steadfast financial governance of its economy in order to sustain its efforts in warfare, rebuild the economy, and attain its objective of transforming into a prosperous, democratic, Western nation. Eradicating corruption in Ukraine is an imperative task that must be pursued relentlessly."

The Ukrainian embassy informed CNN that Ukrainian officials signed an "energy memorandum" during their visit to Washington last month. They also mentioned that Ukraine has enacted a law inspired by European standards to prevent misconduct in wholesale energy markets. According to the White House document, this law should be implemented by April 2024.

Zelensky, on his part, has taken active measures to combat corruption, specifically in light of Russia's invasion of Ukraine. He recently made significant changes at the Ukrainian Ministry of Defense by dismissing the defense minister and several senior defense officials. Additionally, earlier this year, he initiated prominent raids targeting officials suspected of engaging in corrupt practices.

Account for every single penny

Ukraine considers the direct budget support it gets from the US and other foreign allies to be vital to keeping its economy afloat.

"We greatly appreciate the arrival of this funding in the form of grants, as it does not add to Ukraine's state debt, which is crucial during these challenging times," expressed Ukrainian Prime Minister Denys Shmyhal to Blinken last month, with regards to the direct budget support provided by the US for Ukraine.

According to a senior Democratic Senate aide, this money is also regarded as the most scrutinized form of assistance to Ukraine. "The Ukrainian government knows that they are required to provide a detailed account of every single penny. The decision-makers in Ukraine are aware that being accountable is essential in order to continue receiving funds. This has consistently been highlighted by the administration, which is justified considering the level of support we are providing them."

USAID's inspector general and Ukraine's Specialized Anti-Corruption Prosecutor signed a memorandum of understanding in July to enhance USAID's capacity to investigate any financial mismanagement or malpractice committed by Ukraine, which includes the provision of direct budgetary assistance.

The United States plans to offer a maximum of $3.3 billion in direct economic assistance to Ukraine upon Congressional approval of its $24 billion supplementary funding proposal for Ukraine.

The supplemental request is currently in a state of uncertainty.

On Saturday, Congress approved a temporary bill to extend government funding until mid-November. However, this legislation does not allocate any extra funds for Ukraine. Republicans have been increasingly critical of the funding and have demanded stricter oversight. Some Republicans still oppose supporting Ukraine on principle, despite Kyiv's efforts to combat corruption.

The Pentagon is implementing additional measures to improve the oversight of US military aid sent to Ukraine. Last month, the Defense Department inspector general revealed plans to create a new team in Ukraine tasked with monitoring ongoing US security assistance to Kyiv. Since the beginning of the Biden administration, the total amount of aid provided has exceeded $43.7 billion. This development signifies the first instance of DoD IG personnel stationed in Ukraine since the Russian invasion in February 2022, according to spokeswoman Megan Reed.

The draft list of priorities for Ukraine by the White House emphasizes the need for the Ukrainian Ministry of Defense to overhaul its armament and procurement processes to align them with NATO standards, specifically focusing on transparency, accountability, efficiency, and competition in defense procurement.

A recent concern that has arisen is the possibility of Zelensky calling for a presidential election in March 2024. Senator Lindsey Graham advocates for holding the election as a means to showcase Ukraine's dedication to freedom and democracy in response to Russia's invasion.

Zelensky acknowledged the complexity and expense of holding an election during wartime, emphasizing the need for international observers to validate the results. However, he expressed his willingness to proceed with a wartime election if deemed necessary.