Zelenskyy’s government sabotaged work of supervisory boards, contributing to growing corruption – The New York Times
The American publication The New York Times has published an investigation into how the Ukrainian government has blocked the work of independent supervisory boards of state-owned enterprises for years, contributing to the growth of corruption.
This was reported by Censor.NET with reference to ZN.ua.
The government interfered in the work of state-owned enterprises
When Russian troops attacked Ukraine, Kyiv's Western partners faced a dilemma: how to invest billions in supporting Ukraine and be sure that the money would not be stolen by corrupt officials and heads of state-owned enterprises. The risks were high, as key sectors — energy supply, arms procurement and nuclear energy — were controlled by state-owned companies, which for many years had been considered a source of enrichment for influential people.
To secure funding, the US and European countries demanded control. They obliged Ukraine to allow independent supervisory boards — groups of external experts who monitor spending, appoint managers and prevent corruption, according to correspondents from The New York Times.
According to The New York Times investigation, over the past four years, the Ukrainian government has systematically obstructed such oversight, contributing to the spread of corruption.
The correspondents add that the administration of Ukrainian President Volodymyr Zelensky has filled the boards of directors with people loyal to him and left some seats empty. The leadership in Kyiv even rewrote the companies' charters to limit oversight, retaining government control and allowing hundreds of millions of dollars to be spent without outside interference.
Supervisory boards perform an important oversight function, allowing independent experts, usually from other countries, to scrutinise key decisions made by Ukrainian state-owned companies.
They also play a central role in the corruption scandal swirling around Zelensky's government. Anti-corruption authorities have accused members of his inner circle of embezzling and laundering $100 million from the state-owned nuclear energy company Energoatom.
Zelensky's administration has blamed Energoatom's supervisory board for failing to stop the corruption. But, as the newspaper found, it was Zelensky's government that stripped Energoatom's supervisory board of its powers.
In documents and interviews with about 20 Western and Ukrainian officials who worked closely with or were members of the companies' boards of directors, the NYT found political interference not only in Energoatom, but also in the national energy company Ukrenergo and the Ukrainian Defence Procurement Agency. Some people spoke on condition of anonymity to discuss confidential matters.
Zelensky's adviser declined to comment, saying that supervisory boards were not within the president's purview.
"European leaders have privately criticised but reluctantly tolerated corruption in Ukraine for years, believing that support for the fight against Russian aggression is paramount. So even as Ukraine undermined external oversight, European money kept flowing," the correspondents add.
Political interference in the activities of the Energoatom supervisory board is an example of how Ukrainian leaders are blocking efforts to prevent corruption. Zelensky's administration delayed the formation of the Energoatom board, and when it was finally formed, the government left one seat vacant, limiting the board's ability to act.
If the supervisory board had been functioning normally, it could have curbed what the authorities now call widespread corruption. According to investigators, contractors working on Energoatom projects had to pay kickbacks of up to 15 per cent.
The scandal surrounding Energoatom has politically undermined Zelenskyy's authority and weakened his arguments in favour of Ukraine joining the European Union and NATO — two institutions that are cautious about accepting a new member suffering from corruption.
If Ukraine does not overcome corruption, Kyiv may also fail to receive the hundreds of billions needed to rebuild the country after the war.
How to take control of the board
Volodymyr Kudritskyi, former CEO of Ukrenergo, said that the Zelenskyy administration began interfering in the company's activities several months before the start of the full-scale war.
He said that at the end of 2021, he began receiving calls from Herman Halushchenko, then Minister of Energy. Halushchenko wanted Kudritsky to hire people with limited experience in the energy sector for management positions.
"He started insisting. He started aggressively trying to force me to appoint them," Kudritsky said.
The budgets of state-owned companies such as Ukrenergo have historically been prime targets for corrupt politicians, so Kudritsky suspected something was amiss. He said he successfully resisted the pressure because he had the support of the supervisory board.
Ukrenergo's supervisory board consists of seven members who oversee key projects and management appointments. The government forms the board, but four of its members are selected from among foreigners — from a list submitted by the EU and Western banks. Three more seats are occupied by representatives of the Ukrainian authorities. The principle is that independent assessment will always prevail over the interests of the government.
By the end of 2021, the term of office of Ukrenergo's supervisory board was coming to an end. European and Ukrainian officials began to meet to determine the new composition of the board. As European officials now say, they did not realise at the time that the Ukrainian government had effectively taken control of this board and thus created a model that it later applied to other state-owned companies.
The first signs that something was wrong appeared after the European Union, the World Bank and the European Bank for Reconstruction and Development submitted their lists of candidates.
Instead of choosing exclusively from this list, the Ukrainian Ministry of Energy, led by Halushchenko, insisted that one of the positions be filled by Roman Pionkowski, a Polish energy expert who had worked on consulting projects in Ukraine. Two officials said that Pionkowski was interviewed for the position but received too low a rating to make the list.
Western officials were surprised but accepted Pionkowski as one of four foreign experts. The new board was approved in December 2021.
Then the Russians invaded. Ukrenergo soon faced constant attacks on its energy infrastructure.
"Under Kudrytskyi's leadership, Ukrenergo carried out repairs around the clock, which made it possible to maintain the country's energy supply. The company also became a reliable partner for Western donors, who provided it with $1.7 billion in loans and grants in the early years of the war," the correspondents say.
Soon, government officials accused Kudritsky of failing to protect the energy infrastructure. Although he had the support of European countries, he clashed with Galushchenko, who wanted to dismiss him.
This time, Kudrytskyi had no protection from the board. One foreign member of the board resigned for personal reasons, and the government did not fill the vacancy, resulting in an equal distribution between foreign experts and Ukrainian representatives.
This should have been enough to save Kudrytskyi from dismissal. But Pionkowski, a Polish expert, sided with the Ukrainians and voted for his dismissal.
Pionkowski defended his independence. He said he did not follow instructions from Kyiv. He voted for the dismissal because, according to him, Kudrytsky repeatedly misled the management. He did not provide any details.
Two other foreign board members resigned in protest, issuing a statement calling the dismissal "politically motivated."
But European donors — banks, central governments and international institutions that help finance Ukraine — did almost nothing. The Reconstruction Bank froze new payments to Ukrenergo but honoured its current commitments.
According to four European officials, no one in European capitals wanted to withdraw financial support and create the impression that they were turning their backs on Ukraine.
Kudritsky said that all this had nothing to do with energy policy. He said that the Ministry of Energy wanted to facilitate the possibility of unpunished corruption.
Behind the scenes of the scandal
While Galushchenko was trying to establish control over Ukrenergo, he was simultaneously promoting a major spending plan at Energoatom.
He wanted to purchase two old Russian-designed nuclear reactors from Bulgaria. Galushchenko wanted to transport them to a nuclear power plant in western Ukraine, restore them to working order and connect them to the power grid.
Energoatom was counting on the help of Western partners to finance the $600 million project.
Western donors and anti-corruption organisations immediately criticised the idea. In their opinion, the project had all the hallmarks of wastefulness in one of Ukraine's most notoriously corrupt state-owned companies.
The reactor project began to be implemented just as the Ukrainian government was approving Energoatom's first supervisory board. One of the new board members, British entrepreneur Tim Stone, who has experience in finance and nuclear energy, planned to conduct an audit of these reactors.
However, the Ukrainian authorities blocked the contracts with the supervisory board. Kyiv blamed this on disputes over remuneration and insurance. European officials and some Ukrainian lawmakers said they saw another reason.
"They understood that as soon as the supervisory board began its work, they could lose control," said Oleksiy Movchan, a lawmaker from Zelensky's party who advocated for the creation of independent boards.
While Energoatom's supervisory board remained inactive, Ukrainian officials organised a $100 million kickback scheme at the company, according to anti-corruption investigators.
On 12 December 2024, about a year after the board was supposed to start work, ambassadors from Ukraine's leading allies, including the United States and the United Kingdom, called on the government to form the board.
"This is particularly important as Energoatom considers new large long-term financial investments and commitments," said a letter obtained by the newspaper.
While the composition of the board was not yet finalised, Stone decided to leave.
When Ukraine finally approved the composition of the supervisory board in January, Stone's seat was empty, leaving the composition evenly balanced — two foreign experts and two Ukrainian representatives.
The reactor deal is currently on hold and is not part of the corruption investigation. However, this distribution of positions left Energoatom virtually powerless to prevent corruption: the company was unable to replace its top managers, one of whom had been suspended as part of a bribery investigation.
Rewriting the rules on defence procurement
More than a year after the war began, following a scandal over inflated defence contracts, donors forced Kyiv to set up an independent agency to bring order to the arms procurement process.
However, since its launch in January 2024, the Defence Procurement Agency has spent at least $1 billion in European funds with either an incomplete supervisory board or none at all.
Marina Bezrukova, the first head of the Defence Procurement Agency, said the absence of a board during her first year in office made her vulnerable to pressure from the Zelenskyy administration. She said the Ministry of Defence insisted that she approve questionable contracts, including one with a state-owned weapons factory that was unable to produce mortar shells efficiently.
Under pressure, she signed the documents. Many of the shells failed to detonate, sparking public protests in the autumn of 2024.
The Ministry of Defence accused Bezrukova of failing to deliver weapons to the front line on time. However, the decision on her dismissal was made by the supervisory board, which finally convened in December last year.
On the eve of the first meeting of the board, the Ministry of Defence rewrote the Agency's charter, granting itself the power to appoint and dismiss the agency's head. The board protested against the interference and extended Bezrukova's contract for another year.
Zelensky's administration did not stop there. When the foreign expert resigned, leaving two foreigners and two government representatives on the board, the authorities seized the moment. The two government representatives were dismissed, causing the board to lose its quorum.
The powers were transferred to the Ministry of Defence, and Bezrukova was dismissed earlier this year.
"Supervisory boards are just a smokescreen. They are not real," she said in an interview.
The government's move against the Defence Procurement Agency coincided with Donald Trump's return to power and Washington's gradual withdrawal from the war. This change, according to European officials, emboldened Ukrainian authorities to roll back anti-corruption safeguards.
The Zelensky administration quietly established control by rewriting the statutes of state-owned companies, including Ukrenergo, to grant itself new powers or change the voting process. The government also tried, unsuccessfully, to strip anti-corruption agencies of their powers when they were investigating Energoatom.
With the US stepping back, Europe has to fight corruption in Kyiv on its own. A European Union spokeswoman said officials had pressured Ukraine to reform its state-owned enterprises. She said there was no evidence that European Union money had been misused.
