THE KRUK REPORT: Damage to Ukraine from Panama Papers extends well beyond its borders

THE KRUK REPORT: Damage to Ukraine from Panama Papers extends well beyond its borders
President Petro Poroshenko’s offshore arrangements fits all too well into the popular stereotype of Ukraine being hopelessly corrupt.
By Kateryna Kruk in Brussels April 5, 2016

April 4 will remain on the pages of history as one of the biggest blows by investigative journalists against corrupt politicians, and another nail in the coffin for the idea that in our globalized and online world you can hide improprieties forever.

The release of the so-called “Panama Papers” – millions of documents containing details of thousands of offshore shell companies used by the world’s elites to hide their money – will have an even bigger impact on Ukraine than most countries, and cause more serious consequences for President Petro Poroshenko than the other big names outed by the expose.

Ukraine is in the midst of a very serious political crisis, which has recently intensified due to developments in the Prosecutor General’s Office and negotiations over a new government. And with every twist of the saga, Poroshenko has lost political points. That is why the details concerning Poroshenko’s business arrangements in the Panama Papers don't come as a complete surprise, but rather is more stripping away of the veneer to reveal the true nature of the Ukrainian political elites. Their popularity shrinks as each new wrongdoing is exposed.

After taking a first round victory in the last elections with almost a record level of support, President Poroshenko was for a long time Ukraine’s most popular politician. But in the last three weeks he has started being compared to the much-maligned former president Viktor Yanukovych. What has catalyzed such change? And why should we view the recent scandal concerning Porosheko as a watershed moment?

With each passing day since February 2014, Ukraine’s post-revolution romantic belief that we would automatically get good politicians after what we had been through – more than 100 people died in the Maidan protests that ousted Yanukovych and his corrupt regime – has died. Yet Poroshenko kept his image as an honest and caring president for quite a long time. But there were increasing signs that this image was false, the most glaring being February’s very public resignation of economy minister Aivaras Abromavicius.

In his resignation statement, Abromavicius, who was regarded as one of the most successful ministers of the post-Maidan government, explained that he was leaving because of consistent pressure on him from people close to Prime Minister Arseniy Yatsenyuk and President Poroshenko. This event escalated the already existing, but at that time low level, political crisis in Ukraine. Abromavicius’ resignation brought the problems out into the open and since then a change in government ceased being only a possibility and instead became a necessity.

The political establishment had few ways to create a new government. Experts and many politicians pointed to the two most obvious candidatures: Natalie Jaresko, the current finance minister, and Volodymyr Groysman, speaker of the Verkhovna Rada. Jaresko is favoured by foreign partners and the so-called “young faces” – a group of Ukrainian lawmakers, businessmen, members of government and experts. But Jaresko, who is seen as an unlikely person to engage in deals behind the scenes, seems to be the “to good to be true” option.

Groysman is regarded as a “Poroshenko man”. Regardless of how we assess Yatsenyuk’s premiership, he has played an important balancing role in preventing Poroshenko from accumulating all the power in his own hands. Publicly, Jaresko said that she is ready to form a technocratic government, but her statement had no impact – the political elites decided to back Groysman.

The way negotiations about a future government were held tells you a lot about Ukrainian politics: Groysman presented no programme and all the discussions were around names, not action plans. Literally, at the very last moment before the coalition’s decision to support Groysman’s nomination, former PM Yulia Tymoshenko, knowing that without her backing Groysman would not have enough votes, presented a list of demands that directly contradicts the requirements of the International Monetary Fund (IMF). That forced Yatsenyuk and Poroshenko to look for ‘Plan B’ and try to cobble together enough votes by inviting independent MPs to join either Yatsenyuk’s People’s Front or Poroshenko’s eponymous bloc. These sorts of shenanigans are not new for Ukraine; during Yanukovych’s time, the buying of MP’s votes was commonplace. In Ukraine we even have a special term for such deputies – tushki.

In the current situation, every single vote is a crucial vote, meaning that the price for getting MPs to join the Yatsenyuk/Poroshenko coalition is very high, both politically and most probably materially. The sad part of this situation is that the current PM and president don’t have enough political support to sustain their rule and must look for other ways to do so that were created and mastered by the previous corrupt regime.

Office of ill repute

Unfortunately, problems associated with keeping together a coalition or forming a new government haven’t been the only challenge for Ukraine. In the last two weeks, the Prosecutor General’s Office has deservedly become the biggest area of concern.

If you asked an ordinary Ukrainian whom he/she knows from the Prosecutor General’s Office, they would most probably list three names: Viktor Shokin, Davit Sakvarelidze, Vitaly Kasko. The last two are perceived as reformers, strongly supported by civil society and foreign partners.

The day before the expected no-confidence vote in PM Yatsenyuk's government in February, Deputy Prosecutor General Vitaliy Kasko resigned, attributing his decision in a letter to the impossibility of carrying out reforms at the Prosecutor General’s Office due to the Yanukovych-style practices operating there. Prosecutor General Shokin immediately accepted his resignation and didn’t wait long to start a criminal investigation into his former colleague.

With Kasko’s departure, Sakvarelidze was the last “reformer” in the system. He didn’t last much longer. A few hours before the dismissal of the hopeless Shokin was approved by the Verkhovna Rada on March 29, Shokin fired Sakvarelidze. This event is more important and more worrying than the dismissal of Shokin himself. It is obvious that whoever replaces Shokin, he will most probably continue using the methods of his predecessor. But the dismissal of all reformers, everyone who tried to bring change to the prosecutor’s office, leaves us with the pessimistic assumption that their place won’t be taken by new reformers.

And everyone who has dared to say the system is rotten and tried to change it has paid a high price; both Kasko and Sakvarelidze are now facing charges of allegedly ordering an illegal investigation into the “diamond prosecutors”, so-called because 65 diamonds were found in the possession of one of the men during their arrest. The Prosecutor General’s Office has also started another investigation into Center Protydii Corupcii (Center for Corruption Prevention), Ukraine’s biggest and most respectable anti-corruption NGO.

Recent developments at the Prosecutor General’s Office prove better than anything that the authorities, or to be more precise the team led by President Poroshenko, have no intention of reforming Ukraine. Their priority is to remain in power, even if to do so they have to resort to the kind of practices used during Yanukovych’s regime.

Beyond Panama

Yet even all those events combined were not as devastating as the publication of the Panama Papers. Ukraine is polarised between those who suspect Poroshenko of deliberately failing to deliver on his election promise to sell his businesses, and those who see his actions as an attempt to really do so.

International reaction is less emotional but also less favourable for Ukraine: so far, the story is only just gaining traction and there are no attempts to challenge the presented version. It is still too early to make conclusions and trade accusations, but so far the situation described in the investigation doesn’t imply so much a criminal offense as an administrative one – at least based on the details of the deals that we have now. And this is where the problems begin, because it brings us into the realm of political responsibility and public expectations about the leadership, where there are no milestones, no rules, no measurements.

If this investigation was only published in the Ukrainian press, it would have a limited effect. But since it appeared at the international level, along with other very high-profile names, the damage it has already done to Ukraine’s credibility is immense. It could destroy the very last vestiges of trust towards the ruling elites and undermine any lingering belief that Ukraine has changed for the better after Maidan.

Even if Poroshenko manages to keep a lid on the level of indignation within Ukraine and doesn’t pay too high a price politically, at the international level, which has its own dynamics and specifics, it will be close to impossible to do so. News about Poroshenko’s offshore arrangements fits all too well into the popular stereotype of Ukraine being hopelessly corrupt and poorly managed. If during the last two years Maidan was Ukraine’s strongest source of credibility, recent developments have done much to undermine that. Obviously, it won’t overshadow the revolution, but it will detach it from the current political reality, making it some sort of a romantic dream and not a roadmap for change.

Now all branches of Ukraine’s power structure have been badly discredited by different scandals, it will be nigh on impossible to get it back. Not only are the political elites losing their credibility, because of their actions the whole country is losing supporters around the world. That is very unfair for a society that, despite everything, is not giving up, but is fighting a war, trying to develop civil society and still hopes for a better future.

Activist, journalist and co-founder of Global Ukrainians, an international network of Ukrainians worldwide, Kruk was awarded the Atlantic Council Freedom Award for her work communicating the Maidan revolution to the world. She predicted a frozen conflict in July 2014, which has largely come to pass, and now comments on the progress of crucial reforms in Ukraine.