By Daryna Krasnolutska

KYIV (Bloomberg) -- It began with last month’s shock detention

of the interior minister’s son in a corruption sting. Simmering
animosity between Ukraine’s law-enforcement bodies has since
boiled over into a flurry of furious accusations and counter-
claims.
The now very public sparring includes leaked tapes and a
detective being locked against his will in a Kiev flat. In the
latest salvo, the chief prosecutor took aim at the former Soviet
republic’s main graft-busting agency, which fired back by saying
it’s investigating the source of his wealth.

“It’s not important how we treat each other personally --

it’s important what joint results we show,” Artem Sytnyk, who
heads the National Anti-Corruption Bureau, told a parliamentary
committee this week. “It’s not the first investigation against
our employees and I’m sure it’s not the last.”

EU Wearies of Ukraine’s Limp Anti-Corruption Effort

The timing is far from ideal. Already criticized for
reneging on pledges to tackle graft, Ukrainian officials are in
Brussels for Friday’s European Union Eastern Partnership summit
where the bloc fosters ties with some of the continent’s ex-
communist contingent. Four years after events at a similar
gathering ignited Ukraine’s second pro-EU revolt in a decade,
fatigue is setting in as those who replaced the Russian-backed
government fail to uphold promises.

As a result, Ukraine is struggling to achieve a clear
commitment from the EU that it can eventually become a member. A
push together with Lithuania to tap a wider pool of donors,
targeting $5 billion a year beyond its existing $17.5 billion
bailout, stands little chance at present.

“Many in the West have long doubted Ukraine’s ability to
fundamentally reform itself, and they’ll feel vindicated by this
development in the law-enforcement agencies,” Joerg Forbrig, a
Berlin-based senior fellow at the German Marshall Fund, said by
email. “Repeated setbacks in the reform process reduce Western
willingness to support Ukraine financially. But cutting Western
aid is the best recipe for halting Ukraine’s reform process.”

He's back. Last March, Roman Nasirov was suspended as chairman of the State Fiscal Service. Last week, he gave a press conference responding to his recent indictment by Special Anti-Corruption Prosecutor on charges of embezzling $75 million in tax revenue. (UNIAN/Inna Sokolovska)

To break free from Russia’s orbit, Ukraine signed

association and trade pacts with the EU in 2014, pledging to
overhaul its institutions and align with the bloc’s standards,
even as it battles Kremlin-backed insurgents in its easternmost
regions. The IMF program, stalled over delays to key reforms,
outlined steps to remake the ex-Soviet economy. The U.S. and the
European Union are among donors that provide extra bilateral
financing.

Other ex-Eastern Bloc nations have signed association
agreements with the EU -- Moldova and Georgia will also attend
this week’s summit. Along with Ukraine, they’ve been rewarded
with visa-free travel to the bloc.

But none has been given a
clear road to membership. While Croatia joined the EU in 2013,
Brexit and the refugee crisis have made following suit trickier.
That’s not deterring Ukraine. President Petro Poroshenko
calls accession “the ultimate goal.” His deputy chief of staff,
Kostyantyn Yelisieiev, said that telling Ukraine it could join
when it met the bloc’s standards “would mean everything to us”
and cost the EU nothing.

Needed: Firm Moves

“Persistence is a good thing but persistence at reforms is
probably more important than getting guarantees about
accession,” Lithuanian President Dalia Grybauskaite said Friday
in Brussels. “I’d like to wish Ukraine to be more stubborn and
to deliver reform more radically and faster for its own
country.”
EU officials say creating an anti-corruption court -- an
IMF requirement on which Poroshenko has blown hot and cold -- is
a priority. While progress has been made to tackle graft,
further efforts demand cooperation between law-enforcement
bodies, Hugues Mingarelli, head of the EU delegation to Ukraine,
said by email.
Preparations to set up the anti-corruption court will need
to be stepped up in the coming weeks as Ukraine targets a
resumption of IMF financing in the first quarter of 2018. The
law-enforcement spat follows other discouraging signals, from
harassment of transparency activists to a probe into reformist
Finance Minister Oleksandr Danylyuk. He said Friday that he may
face a criminal investigation.
The latest confrontation “shows that in Ukraine there are
both forces that push for the reform of the justice system and
forces that are opposed,” Paul Ivan, senior analyst at the
European Policy Centre in Brussels, said by email. Despite
corruption being a major motivation for Ukraine’s most-recent
revolution, “the fight to reform the country is far from being
over.”

--With assistance from Milda Seputyte.

To contact the reporter on this story:
Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net

Timothy Ash comments:

Let's go back a couple of years. Experienced Ukraine watchers, like myself, were always saying that this whole process would fail.

Because?

How can a poor state like Ukraine, rein in oligarchs and Ukraine's elites who are fabulously wealthy and will hire the top lawyers and subvert the whole system to ensure that no one goes to jail.

As I wrote a couple of years back, better to assume that no one will go to jail at the outset, run a Maidan Truth and Reconciliation Process, get people to declare their ill-gotten gains, pay a windfall tax, and let the country move on.

Mohammad bin Salman in Saudi Arabia has figured this out far quicker than the Ukrainians. His use of the best five star hotel in Riyadh looks like paying off handsomely.

First, he is likely to get $100 billion in windfall receipts/fines.

Second, this will likely change behavior. Oligarchs/elites will realize the rules of the game have changed.

Ukraine has plenty of five star hotels that seem to have plenty of free rooms and conferencing facilities which can be put to great effect.

Posted: Nov. 25, 2017