KYIV BLOG: Anti-graft agency tries to hook its first big fish in Ukraine's filthy pond

 KYIV BLOG: Anti-graft agency tries to hook its first big fish in Ukraine's filthy pond
Tax service head Roman Nasirov address the Ukrainian parliament in 2015.
By Ben Aris in Berlin March 8, 2017

Ukraine’s activists have come out again to force their government into keeping its promise of change. On March 2, the country’s new anti-corruption agency moved to detain the first big fish, the head of the State Fiscal Service, Roman Nasirov, on corruption charges, just over three years after the Euromaidan protests swept the kleptocratic regime of Viktor Yanukovych from office. Fearing he would be let off the line again, crowds at the weekend blocked a Kyiv court until it ordered his detention for 60 days pending investigation or the posting of bail of UAH100mn (€3.5mn).

Since the turbulent days of early 2014, that promised change has not arrived. The government’s popularity in the polls has plummeted and it is now unclear that the ruling Petro Poroshenko Bloc would even clear the 5% threshold to get back into parliament if elections were held tomorrow. The government score on arresting top officials for corruption was precisely zero before. That is why the indictment of Nasirov, the head of the State Fiscal Service and a close personal ally of President Poroshenko, is so important.

Nasirov is accused of diverting some $75mn while restructuring tax debts. He was  also the former head of the customs service, one of the more notoriously corrupt of all the state organs, and is typical of the untouchable political elite that is at the root of Ukraine’s problems.

The government has paid lip service to its international donors’ demands to do something about corruption, but at every turn it has sabotaged its own initiatives or simply failed to follow through, so little has changed. Transparency International recently ranked Ukraine as the most corrupt country in Europe in its Corruption Perceptions Index 2016.

An example is the income e-declarations that all state officials were obliged to make last year. Two dozen officials including some judges and MPs are nominally under investigation by the National Anti-Corruption Bureau of Ukraine (NABU), but no arrests have been made, and the agency is still denied full access to the e-declarations.

Nasirov’s indictment comes, predictably enough, just as the International Monetary Fund (IMF) is due to consider releasing its next tranche of $1bn from its $17.5bn stand-by programme for Ukraine. The country was supposed to have received some $10bn so far, but the failure of the government to deliver on reforms means that only three tranches totalling $7.3bn have been disbursed since the bail-out package was agreed in March 2015.

IMF sitting on its hands

The next $1bn tranche was supposed to come in January, but despite several pronouncements that it will be released “within days”, the IMF is still sitting on its hands. The government’s flourishes of activity such as e-procurement or an IMF-compliant budget have usually occurred around the time that Ukraine’s money comes up for review, but the IMF has been increasingly unimpressed. The groundwork is now complete for the fund to review the next disbursement, but the tortuous language the IMF used in its subsequent statement strongly implied that the lender is still not convinced.

“The IMF staff has reached agreement with the Ukrainian authorities on an updated memorandum of economic and financial policies,” the Fund’s Ukrainian mission chief Ron van Rooden said in the statement on March 6. “This paves the way for consideration of the third review of the arrangement under the Extended Fund Facility by the IMF’s Executive Board ... in the second half of March.”

“Paves the way” for the “consideration” by the board later the same month. You could not be more circumspect if you tried.

Fall guy for a tranche?

It could be that Nasirov was being offered up to the IMF as a sacrificial lamb, but the feeling in Kyiv is that is not what is happening. “If Mr Nasirov was to be thrown under a bus - which by pure chance (or probably not) saw the IMF reach agreement for the next tranche following Mr Nasirov’s arrest - then it was a bungled job,” writes Nikolai Holmov in his OdesaTalk blog. “If he is to truly face due process, or whether it was simply a con to get the IMF on board and then to let Mr Nasirov off the hook on a legal technicality later, the theatre played out in such a way that neither public nor foreign institutions will have any increased faith in the leadership - indeed (once again) the opposite has happened.”

The arrest of Nasirov should be a major step in the right direction – if he is actually jailed. But the attempt to prosecute Nasirov quickly descended into farce. In time– honoured tradition he quickly became ill and was admitted to hospital where the indictment papers were served to an unconscious man; one of the Soviet legacies is that police are not allowed to arrest anyone in hospital.

Secondly the charges were brought by the NABU, but it only has 72 hours to affect the arrest of a suspect and has no powers of its own to make arrests but must rely on the General Prosecutor's Office.

Crowd power is back

The fact that the indictment was served on a Friday night meant that a judge had to be found over the weekend to sign off on the arrest warrant. By Sunday Nasirov had made a miraculous recovery and was in court with eight lawyers, but a judge could not be found to sign the necessary paperwork. It appeared that the clock would run out on Sunday night and Nasirov would walk – until the building was surrounded by protestors who forced him to spend the night to Monday morning when the judges would come to work.

Faced with an angry crowd, Nasirov assured the public he would not flee abroad and volunteered to subject himself to 24-hour surveillance. But fears that he might fly are real as the corruption scheme Nasirov is accused of participating in was allegedly organised by MP Oleksandr Onyshchenko, who fled the country when he was accused and now lives in the UK.

It seems that Nasirov will now have to face the charges, but only because the weary people of Ukraine have boxed him into a corner. It remains to be seen if Nasirov will actually stand trial, and if he does, will actually be found guilty and jailed. Given his friends in high places and the government’s zero record on this score, it seems unlikely.

However, the whole story shows that Ukraine is actually making progress. The fact that someone as powerful and well-connected as Nasirov is under investigation could be taken as evidence that the government is bowing to the inevitable. Elections are two years away and as they get closer the government will have to become more convincing. And this is the first outing for the NABU, which must be looking to Romania’s National Anticorruption Directorate (DNA), which has successfully started criminal investigations and trials of the country’s most senior politicians.

“For the first time, the activity of the anti-corruption bureau has reached the inner circle of Ukrainian President Poroshenko with the criminal charges against Nasirov. Poroshenko has taken a neutral position, reaffirming that the anti-corruption bureau is an independent body. Yet we can’t help but think he’s a little nervous about the situation,” says analyst Zenon Zawada of the Concorde Capital brokerage in Kyiv.

With the right leadership the NABU could bring about a major change. Maybe the next official who is accused of corruption will be arrested on a Monday and actually be made to do a perp walk, before they start to try wriggling out of the net.

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss