Zelensky and his cronies are trying to cover up a major corruption scandal in Ukraine – what role is the US playing?

Last month’s shockwave of resignations among top Ukrainian officials, caused by numerous corruption scandals, ended as quickly as it began. At the start of February, it seemed that Defense Minister Alexei Reznikov would become the ultimate victim of the purge. His imminent departure was openly discussed in the Ukrainian parliament and hints were even dropped by the President’s office.

His possible resignation was also discussed in leading international media. However, just two weeks later, the threat hanging over Reznikov disappeared when the politician met with Western leaders and plainly stated that he had no intention of leaving office. 

How did Reznikov avoid being culled, what role did the visit of US inspectors to Kiev play in the process, and what was the big corruption scandal in the Defense Ministry of Ukraine all about?

An internal conflict 

Various sources began speculating about the possible resignation of Reznikov on February 5. They claimed that the current Chief of the Main Directorate of Intelligence of the Ministry of Defence of Ukraine, major general Kirill Budanov, would become Reznikov’s successor. The reports appeared against the background of a large corruption scandal at the ministry linked to food procurement for front-line troops.

At the time, the chairman of President Vladimir Zelensky’s ‘Servant of the People’ political party, David Arakhamiya, said that Reznikov would be offered the position of Minister for Strategic Industries in order to “strengthen military-industrial cooperation” and would handle Western supplies of military equipment for the Armed Forces of Ukraine (AFU).

In the following days, the possible resignation was discussed not just in Ukrainian and Russian media, but in foreign publications such as The Guardian and Politico. Discussions simultaneously proceeded in Kiev’s Verkhovna Rada where Dmitry Razumkov, a former ally of Zelensky, promised that if the Defense Minister were to resign over a corruption scandal, parliament would not support his appointment to a new position. However, discussions in parliament quickly dissipated and Arakhamiya, who previously pushed for Reznikov’s resignation, announced that no forthcoming personnel changes are expected in the government in the near future.

Failed resignation

On 15 February, Reznikov himself clarified the situation. Asked by Reuters whether he planned to remain in office for the next few months, he replied: “Yes, it was my president’s decision.”

At the same time, the official suggested that criticism of him could be attributed to a desire for personal revenge by anti-corruption activist Vitaly Shabunin, over his transfer from the Ukrainian Defense Ministry back to units of the Territorial Defence Force. “There are people, who, in the midst of a political anti-corruption career, wake up and fall asleep with my surname,” the minister said.

However, there are various theories as to why the resignation did not take place. According to one, an upcoming meeting with Western backers at Ramstein Air Base at that time played a role. Replacing Reznikov would have created an unfavorable impression and could have affected the negotiating process.

Additionally, there is another unofficial version, according to which the head of the presidential administration, Andrey Yermak, defended the minister. Yermak is considered to be a patron of Reznikov, and he allegedly tried to block the replacement. Yermak has been involved in a lengthy, bitter conflict with Arakhamiya, and this has intensified amid the speculation around the defense minister. 

Despite the minister’s various versions and statements, there is still talk on the sidelines of a scenario in which Reznikov will be replaced by Budanov. After all, the corruption scandal has proved to be too high-profile – not only for Ukrainian society but also for Kiev’s foreign partners.

Big cash

It began when Ukrainian publication ‘Zerkalo Nedeli’ disclosed the details of a 13 billion hryvnia ($353 million) contract between the Ministry of Defence of Ukraine and Aktiv Company LLC for the purchase of food supplies at extremely inflated prices.

The deal didn’t involve the purchase of any special equipment, but rather basic food supplies like potatoes, onions, and eggs. Secondly, the document was signed with a company whose authorized capital amounted to just 1,000 hryvnia ($27). The outrageous prices constituted the third and central reason for the scandal. The “wholesale” cost stated by the Ministry of Defence of Ukraine was several times higher than the retail cost of the same products in a premium-class supermarket.

A few days later, Reznikov accused the journalists of “manipulation” and of “informational attacks” which could negatively impact Ukraine’s military-aid negotiations with the West. Later, the politician admitted his “communicative failure” and attempted to write it off as a “technical error,” explaining that eggs and other products were priced per kilogram, not per unit.

“This is a common technical error made by the supplier. Eggs are the only category from the catalog that is calculated in pieces in the appendix to the transaction. The supplier mistakenly indicated the price not per piece, but by weight when he transferred data from one table, where everything was measured by weight, to another,” Reznikov assured the press, claiming that taking this correction into account, the cost “fully corresponds to the market price.”

Nevertheless, a cloud of suspicion descended over several ministry officials. On January 24, Deputy Minister of Defence Vyacheslav Shapovalov resigned, and, on February 3, the Security Service of Ukraine (SBU) detained two businessmen for selling food at inflated prices. Two other high-ranking officials also came under suspicion – Bogdan Khmelnitsky, former Deputy Head of the Department of Public Procurement and Supply of Material Resources, and Vladimir Tereshchenko, Deputy Head of the Department for the Coordination of Foreign Economic Activity. Interestingly, they were charged with offenses unrelated to the procurement of military food supplies.

Charges against Reznikov have not yet been brought, although he has admitted he is responsible for the actions of his subordinates stating, “No official remains in office forever. Not a single one. The ruling regarding my position as the Minister of Defence will be made by a single person – the Supreme Commander-in-Chief, President of Ukraine Vladimir Zelensky, in accordance with the constitution. My own decisions will be based solely on the decision made by the President of Ukraine.”

The scandal was handled in an unusual way. Instead of dismissing the minister, Reznikov himself announced the replacement of a number of his deputies. Among them were the former Ukrainian ambassador to Canada, MP Andrey Shevchenko, and a volunteer, Vitaly Deynega. 

“The minister has been given a chance. He has conducted a lot of activity: he proposes to appoint new deputies, to set up a public anti-corruption council. Perhaps this will give him something. But obviously this is not done on a day-to-day basis. The fact that he was given military man Aleksandr Pavlyuk as his first deputy is also a point in his favor,” a source close to the leadership of the presidential party Servants of the People told news outlet ‘Strana.’

Footprint of US

The corruption scandals in Ukraine are being actively publicized by the media and are linked not only to the government’s political opponents, but also to Ukraine’s partners, primarily the United States. For example, Bihus.Info published an investigation into Yermak’s ties with former deputies from the now banned “Opposition Platform – For Life” party. This was Ukraine’s second largest political faction, until it was prohibited by Zelensky, as part of his crackdown on political opponents. 

Many experts have viewed the saga as an attempt by the American government to solve its own pressing issue of Republican demands that the White House establishes control over US aid to Ukraine. Having gained a majority in the the House of Representatives, the Republican Party wants stricter controls over the expenditure of multibillion-dollar tranches allocated to Kiev. In Ukraine, the political consequences may also be significant. 

On January 29, several inspectors arrived in Kiev from the US. The commission included Inspectors General Diana Shaw, Robert Storch, and Nicole Angarella from the US Department of State, the Pentagon, and the Agency for International Development (USAID), respectively. According to the US Ambassador to Ukraine Bridget Brink, the purpose of their visit was “to advance independent oversight of US assistance to Ukraine”. 

The offices of all three inspectors have established an interdepartmental working group that includes similar services in other departments and several government auditing services – 17 in total. The group will be responsible for holding meetings with “key American and Ukrainian officials, colleagues in various government agencies and non-governmental organizations implementing programs funded by the United States.” The inspectors are clearly trying to work with the civilian population, bypassing the Ukrainian authorities.

Among the inspectors, Robert Storch is closely familiar with Ukraine’s internal affairs. From 2007 to 2009, he worked in Ukraine as a consultant on anti-corruption issues, and in 2014, he returned to Kiev to help develop anti-corruption legislation. He also advised the authorities on the creation of the National Anti-Corruption Bureau of Ukraine (NABU).

Storch has already been active in Ukraine. He met with Vitaliy Shabunin, director of the Anti-Corruption Centre (ACC), who recently criticized the Ukrainian Presidential Office and raised issues of graft in the higher echelons of power, and who was in turn criticized by Reznikov. After the meeting with Storch, however, the anti-corruption activist wrote in his Telegram channel that “all three inspectors-general are deeply aware both of corruption in food purchases and other problems in the Ministry of Defence (which will soon become public)”.

Storch also made time to hold a meeting with Reznikov directly.

What’s next?

It remains unclear whether the increased interest in policing corruption is an initiative by Ukraine’s pro-Western structures or is part of a new strategy from Washington. Nevertheless, the US inspectors’ main goal was to investigate the misuse of allocated funds. Given that the aid accounts for about half of Ukraine’s budget, the US reasonably expects the funds to be used for achieving set goals and not enriching officials.

Consequently, we can be certain that the inspectors won’t disclose any serious abuses following the audit, since this would deal a blow to President Joe Biden and would also reflect negatively on American officials. However, the real information will be likely conveyed to the Ukrainian authorities in private, accompanied by urgent recommendations to dismiss the violators, even down to key members of the president’s team.

The recent wave of resignations in the Ukrainian government and in the Office of the President which occurred before the arrival of the inspectors was spurred only by media accusations. Except for the Deputy Minister for the Development of Communities, Territories, and Infrastructure Vasily Lozinsky, who was detained on suspicion of bribery, none of the dismissed officials were charged. These removals were supported by the US, but undoubtedly the words of the inspectors will carry even more weight.

Meanwhile, Ukrainian President Vladimir Zelensky will face a difficult choice. If he fires members of his team at the insistence of the United States, including key people like Yermak, this may lead to a loss of political control, since the power vertical will become aligned with the opinion of Western structures and its intermediaries, and not with the president. Conversely, if Zelensky resists, it will endanger additional financial assistance from the United States and its allies.

The latter option, however, seems controversial. The Office of the President may decide that Ukraine’s survival is currently more important for the United States than changes in government structure, which risk destabilizing the country during wartime. Therefore, it is possible that the President’s Office will try to convince the US that now is a bad time for structural changes and there is no need to “rock the boat” any further.

Nonetheless, even this argument will not save Zelensky from a wave of negativity and reputational damage among pro-Western media and activists. It could be a serious blow to Kiev’s credibility, especially in the midst of an armed conflict, and may result in an internal political crisis. What seems more likely is that the resignations will continue, but with a gap of several months – a strategy that will demonstrate Ukraine’s efforts to fight corruption to appease its Western sponsors but to also placate Ukrainian society.

At the moment, it looks as if Reznikov has been placed under stricter supervision by activists, who are now members of the Public Council under the Ukrainian Ministry of Defence, in order to retain his position. This is obviously designed to reassure US inspectors and Western agencies, demonstrating that work is being done to overcome government corruption at the highest levels. But it is possible that Reznikov’s possible dismissal will be raised again in the event of a new escalation in the internal political struggle between the head of the Ukrainian presidential administration, Yermak, and his opponents, or in the event of new corruption scandals from elsewhere in government.