Say goodbye to Ukraine’s first line of defense against oligarchs

Hello, and welcome to Oligarchy. We are tracking how Covid-19 and the world’s response to it is affecting the super-rich — and what that means for power and politics.

TOPPING UP THE SWAMP

Buckle up, because we’re going to Ukraine, and things are about to get confusing, then depressing, and then – fair warning – infuriating. 

This week’s news is that the Kyiv District Administration Court (KDAC) has ordered the ministry of justice to sack Artem Sytnyk, head of the National Anti-Corruption Bureau of Ukraine (NABU), and thus the country’s first line of defense against the oligarchs. The KDAC – which is already famous for some extremely questionable judgements — based its decision on a ruling by the constitutional court, which earlier this year ruled that Sytnyk’s appointment five years ago was illegal. For good measure, the KDAC also ordered police to investigate Sytnyk, because, why not?

So far, so confusing.

The back story is where it gets depressing. NABU, the country’s premier anti-corruption body whose creation was one of the most significant achievements of Ukraine’s 2014 revolution, has meanwhile been investigating the head of the KDAC, his deputy and five other judges, on suspicion of abuse of power. In July, NABU released some details from its investigation, including that KDAC chair Pavlo Vovk lived extremely luxuriously, and had taken dozens of expensive foreign vacations, on the proceeds of illegal decisions.

The release included transcripts of some profane phone conversations, in which someone who sounds like Vovk berated his subordinates, and interfered in almost every aspect of public life, up to and including the formation of the parliamentary majority. (The asterisks are NABU’s own).

  • KDAC Head: “No. You’ve sh*t your pants there. Sasha called and said: “Fu*k. Not for sh*t. Will you declare that there is no fuc*ing coalition’?”
  • KDAC Judge: “So what? What will it affect?”
  • KDAC Head: “I said: ‘Sasha, what are you doing? Did you doubt our political prostitution?’ We have been waiting for this moment for such a long time. Should I remind you everything?”

According to NABU, the judges also discussed trying to illegally obtain a journalist’s phone records, to find out who her source had been. The judge insisted it wasn’t actually him, but it was convincing enough for all the significant anti-corruption organizations in Ukraine, which signed a joint statement demanding that the KDAC be dissolved. 

NABU requested that Vovk and his judges be suspended from duty, while the case against them proceeded, but this is Ukraine, where public officials never miss an opportunity to make things worse. In September, the High Court of Justice ruled that Vovk and his colleagues had been improperly served the documentation, so could continue to act as judges, which gave them plenty of time to take action against NABU, as this week’s news demonstrates.

So, to summarize: a judge has ordered a police chief be sacked, but the police chief refuses to go; the police chief has demanded the judge be sacked, but the judge refuses to go. And this is the state that Ukraine’s battle against corruption has got itself into. It’s like when rats fight each other but their tails get tangled up, so they all die.

  • “Opposition from vested interests remains strong. Pending further reform of the judiciary, courts may continue to be perceived as being subject to undue influence in reversing key reforms,” said the International Monetary Fund in June, and that was before any of this had even happened.

So far, so depressing.

The question of course is: what is President Volodymyr Zelensky doing about this? And the answer is: not much. A year ago, he said he needed time to deal with KDAC, and still, nothing has happened.

  • “The KDAC still has all the powers it needs to undermine any reform, help the corrupt, or help destroy Ukraine’s financial system. Zelensky is personally responsible for all the scandalous decisions of this court, ” said Vitaliy Shabunin, head of the Anti-Corruption Action Center. (You may remember Shabunin from a previous newsletter: earlier this year, his house got burned down and his parents barely escaped with their lives.)

We have been here before. In the immediate aftermath of the 2014 revolution, when public hopes for justice were high, the Prosecutor General’s Office made no progress of any kind in prosecuting corrupt officials from the former regime. Civil society activists demanded it, ambassadors brought it up whenever they could, but still the Prosecutor General remained in place, and the then-president refused to take action against an obviously foot-dragging official. So what happened? Then-Vice President Joe Biden bluntly told the Ukrainian government it wouldn’t get a next tranche of Western funding until it took action, and that broke the deadlock.

The sacking of Viktor Shokin was one of the most important steps that Ukraine’s post-revolutionary government took. Without Biden’s intervention, Ukraine would have made even less progress in cleaning itself up than it has. But that intervention has – in Donald Trump’s White House – been presented as a corrupt play by Biden to help his son’s business interests. Ukraine desperately needs Western help to escape the kleptocratic swamp it has found itself in, but instead has become the ball in Washington’s undignified political game, which has not just ruined the careers of some good Americans, but helped crooked Ukrainian insiders entrench their positions.

I was writing about this long before it was fashionable, but I still find it very, very infuriating that partisan headbangers in Washington have put their own immediate electoral interests ahead of the long-term prospects of a friendly country, which desperately needs help to clean itself up. I sincerely hope that, whoever is president of the United States next year, he’ll take a look at Kyiv and decide to give Sytnyk, NABU and their civil society allies the help they need to clean up the court system. Ukraine deserves so much better than this.

DINING IN

It has been a pandemic of two halves: most of us have had a pretty miserable time; but the already-extremely-rich have seen their fortunes soar. This is obviously great (for them), but it does pose a problem. If you had seen your wealth increase markedly this year, what would you spend it on? 

You can’t go out to a restaurant without risking infection, but the invisible hand of the market has found a solution. An increasingly large number of very rich people are bringing the Michelin Stars home, rather than going in search of good food. You can see the appeal from the chef’s perspective: it’s good money. 

That’s not going to make much of a dent in a major fortune, however, which is where a new trend in Florida comes in. Buy a yacht, and then buy a house with mooring where you can, well, moor it. That’ll eat up tens of millions in one go.

  • “Boats are a COVID-safe way to entertain,” said Nathan Zeder of brokerage the Jills Zeder Group. “So we are seeing a lot of people buying waterfront and parking their boat while they plan a rebuild or create their dream home.”

WHAT I’M READING

The series of reports about how much richer the very rich are getting this year has made me wonder how this will end. Presumably at some point, if societies are going to dig us out of the holes we’ll all in, they’ll have to reverse this enrichment if only to claw back some tax revenue. Any discussion of inequality tends to lead me eventually to Thomas Piketty’s blog, and this latest post by the superstar French economist is particularly interesting.

  • “The Federal Reserve’s balance sheet jumped from $4159 billion as of February 24 to $7056 billion as of  September 28, or nearly $3 trillion in monetary injection in 7 months, which has never been seen before.”
  • “France’s 500 largest fortunes have risen from €210 to €730 billion between 2010 and 2020 (from 10% to 30% of GDP). Such a development is socially and politically unsustainable.”

If this isn’t the moment for a major redesign of the way everything functions, then when exactly would be? And that thought led me back to this episode of one of my favorite podcasts, and the discussion of Foundational Economics, which strikes me as a pretty good basis on which to starting thinking about rebuilding the world.

See you next Wednesday,

Oliver

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Oliver Bullough

Oliver Bullough is an author and journalist from Wales, who specializes in writing about financial crime, often when it has links to the former Soviet Union. His most recent book is Moneyland, why thieves and crooks now rule the world and how to take it back, and he is currently trying to write another one despite lockdown.