‘Where Is the Money?’ Military Graft Becomes a Headache for Ukraine

The removal of Ukraine’s minister of defense after a flurry of reports of graft and financial mismanagement in his department underscores a pivotal challenge for President Volodymyr Zelensky’s wartime leadership: stamping out the corruption that had been widespread in Ukraine for years.

Official corruption was a topic that had been mostly taboo throughout the first year of the war, as Ukrainians rallied around their government in a fight for national survival. But Mr. Zelensky’s announcement Sunday night that he was replacing the defense minister, Oleksii Reznikov, elevated the issue to the highest level of Ukrainian politics.

It comes at a pivotal moment in the war, as Ukraine prosecutes a counteroffensive in the country’s south and east that relies heavily on Western allies for military assistance. These allies have, since the beginning of the war, pressured Mr. Zelensky’s government to ensure that Ukrainian officials were not siphoning off some of the billions of dollars in aid that was flowing into Kyiv.

Just last week, the United States’s national security adviser, Jake Sullivan, met with three high-ranking Ukrainian officials to discuss efforts to stamp out wartime corruption. It comes as some lawmakers in the United States have used graft as an argument for limiting military aid to Ukraine.

Mr. Zelensky has responded to the pressure from allies and criticism at home with a flurry of anticorruption initiatives, not all of them welcomed by experts on government transparency. The most controversial has been a proposal to use martial law powers to punish corruption as treason.

Mr. Reznikov, who has held a range of positions during Mr. Zelensky’s tenure, submitted his resignation Monday morning. He has not been personally implicated in the allegations of mismanaged military contracts. But the widening investigations at his ministry posed a first significant challenge for the government on anti-corruption measures since the start of Russia’s full-scale invasion.

“The question here is, ‘Where is the money?’” said Daria Kaleniuk, the executive director of the Anti-Corruption Action Center in Ukraine, a group dedicated to rooting out public graft that is now focused on war profiteering.

“Corruption can kill,” Ms. Kaleniuk said. “Depending on how effective we are in guarding the public funds, the soldier will either have a weapon or not have a weapon.”

At one point this year, about $980 million in weapons contracts had missed their delivery dates, according to government figures, and some prepayments for weapons had vanished into overseas accounts of weapons dealers, according to reports made to Parliament. Though precise details have not emerged, the irregularities suggest that procurement officials in the ministry did not vet suppliers, or allowed weapons dealers to walk off with money without delivering the armaments.

Ukrainian media reports have pointed to overpayments for basic supplies for the army, such as food and winter coats.

The public revelations of mismanagement so far have not directly touched foreign weapons transferred to the Ukrainian Army, or Western aid money, but they are nonetheless piercing the sense of unquestioning support for the government that Ukrainians had exhibited throughout the first year of Russia’s full-scale invasion.

Two officials with the Defense Ministry — a deputy minister and the head of procurement — were arrested during the winter over the reports of the purchase of overpriced eggs for the army. Mr. Zelensky fired the heads of military recruitment offices last month after allegations emerged that some took bribes from people seeking to avoid the draft.

His proposed initiative to treat corruption as treason set off a wave of criticism that it could lead to an abuse of martial law powers.

Oleksii Goncharenko, a member of Parliament in the opposition European Solidarity party, said of Mr. Zelensky’s record, “I cannot praise his efforts in fighting corruption during the war period.”

Government officials acknowledge that some military contracts failed to produce weaponry or ammunition, and that some money has vanished. But they say that most of the problems arose in the chaotic early months of the invasion last year and have since been remedied.

Mr. Reznikov, the departing defense minister, said last week that he was confident the ministry would return prepayments to suppliers that have gone missing.

As minister of defense, Mr. Reznikov viewed his principal job as rallying allies to provide weaponry. He was not directly responsible for the day-to-day running of the war and his dismissal is not seen as linked to the slow progress of Ukraine’s counteroffensive.

Military spending now accounts for nearly half of Ukraine’s national budget, and the reports of contracting scandals point to a shift in the sources of public corruption.

Before the full-scale invasion, the primary source of embezzlement had been poorly run state companies, of which there were more than 3,000 on the government’s balance sheet. Money was siphoned off through myriad schemes by wealthy insiders, while the national budget, propped up by foreign aid, absorbed the losses.

Anticorruption groups say the huge influxes of funds to support the war have prompted them to shift their focus to military spending.

Ukrainian investigative journalists have highlighted overpayment for basic supplies for the army, like eggs for 17 hryvnia, or 47 cents, each — far above prevailing prices, according to a report in Dzerkalo Tyzhnia, a Ukrainian newspaper. Canned beans were bought from Turkey at more than the price for the same cans in Ukrainian supermarkets, the newspaper reported, even though the military would be expected to purchase at less than retail prices.

The ministry also bought thousands of coats that turned out to be insufficiently insulated for Ukraine’s bitter winters.

Western donors are closely watching how Ukraine tackles the problem, the chairwoman of the Ukrainian Parliament’s anticorruption committee, Anastasia Radina, said in an interview.

Particularly worrying is the proposal to punish corruption as treason because it could allow the domestic intelligence agency, the S.B.U., which is under direct control of the president, to investigate official corruption.

The meeting last week with Mr. Sullivan, the American national security adviser, included the heads of a specialized investigative agency, a prosecutorial office and a court that were set up after Ukraine’s Western political pivot in 2014, with help from the United States and international lenders such as the International Monetary Fund. These are the Ukrainian agencies that could lose power under Mr. Zelensky’s treason proposal.

Western governments are wary of the agencies’ potential weakening, Ms. Radina said, adding that if the proposal goes forward, “most likely they will object.”

But, overall, Ms. Radina, a member of Mr. Zelensky’s governing Servant of the People party, defended the government’s efforts to fend off graft in wartime.

The arrest this past weekend of Ihor Kolomoisky, one of Ukraine’s richest men, was seen as a sign of the drive to curb oligarchs’ political influence. Suspected of fraud and money laundering, Mr. Kolomoisky supported Mr. Zelensky’s 2019 election campaign, but since the war began, the president has appeared to break all ties with him.

In other crackdowns this year, investigators pursued one of their highest-profile prosecutions ever for bribery, against the chief of Ukraine’s Supreme Court, who was ousted and arrested in May. In addition, a deputy economy minister is on trial, accused of embezzling from humanitarian aid funds.

That high-level cases of corruption are coming to light is positive, said Andrii Borovyk, director of Transparency International in Ukraine, rather than an indication of a nation bogged down by insider dealing; it shows that the country can fight the war and graft at the same time, he said.

“Scandals are good,” he said. “The war,” Mr. Borovyk added, “cannot be an excuse to stop fighting corruption.”

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