A Culture of Corruption: Kiev Told to Change to Save Country From Oligarchs

The report titled 'Ukraine's Oligarch Gambit' notes that although challenging the power of these oligarchs has its dangers, "preserving the current state of affairs is even riskier." 

A Generation of Corruption

Following the break-up of the Soviet Union, a major factor behind Ukraine's stalled transformation and limited growth has been put down to the fact that politics has often pandered to the interests of big business.

The situation has only accentuated with time, with some estimates suggesting that up to 70 percent of Ukraine's economy is controlled by wealthy oligarchs, giving these powerful figures significant influence over the country's decision-makers.

According to Chatham House research fellow Orysia Lutsevych:

"The country's economy has been captured by oligarchs, most of whom accumulated their wealth through murky privatization of major industrial assets and through energy trade with Russia."

She notes that over the past 24 years since independence, many oligarchs have helped to create various structures and legal frameworks that not only protected their interests, but also ensured their actions remained within the law.

Controlling media resources and political party funding has allowed these business figures to exert their power and influence on the political process.

"Whenever a new minister was appointed, it was common for people to ask which oligarch 'owns' him or her. Members of parliament also formed a tight network around the oligarchs they served," Ms Lutsevych says.

The results of such a system that facilitates corruption and destroys market competition are plain to see, with Ukraine's GDP only slightly higher than it was in 1991, while the country is ranked last out of 43 European states when it comes to economic freedom.

Efforts for New Reform or Much of the Same?

Following the Euromaidan revolution which led to the overthrow of former President Viktor Yanukovych, parliamentarians in Ukraine have been advocating the benefits of reform to reduce the power of oligarchs in Ukraine.

Western backers have been encouraged by the introduction of new laws strengthening the accountability of judges and other reforms aimed at evening the balance of power in Ukraine.

As a result of Crimea's decision to join Russia and the war in eastern Ukraine, many of the country's previously powerful oligarchs saw their wealth, and subsequent influence, fall away.

This, combined with the arrest of a small number of oligarchs on corruption charges, has given hope that Ukraine may be turning the corner in its battle with its own big businesses.

However, others remain highly critical of the direction of the current government in Ukraine, noting that many of those who have targeted by authorities were backers of former leader Viktor Yanukovych.

This is despite Ukraine's constitution banning state officials from owning a business, which have led many to question whether the Euromaidan overthrow truly was a revolution, or just more of the same for a country crippled by cronyism.

2015 and Beyond — Corruption or Clarity

Although encouraged by the steps taken to try and improve the accountability and transparency in Ukraine, many experts argue that there is still a long way to go before the country can operate efficiently.

There have been calls in Ukraine to introduce new rules enabling greater transparency of political party finances, while the West has also been pressured to ensure any financial support given to Kiev should be conditional and based on continued reform, to help roll back the influence of big business.

However despite the optimism, there is also concern according to researcher Orysia Lutsevych, who is cautious about the recent privatization of more than 2,000 state-owned enterprises and upcoming reforms for the gas and electricity markets.

"Will they help towards a more level playing field for investors or will they simply breed new oligarchs?"