Since 2014 the EU and the Financial Institutions have mobilised more than €17 billion in grants and loans to support reforms in Ukraine. But grand corruption and state capture are still widespread in Ukraine despite EU action. Despite varied support the EU has offered to Ukraine, oligarchs and vested interests continue to undermine the rule of law in Ukraine and to threaten the country’s development.

Ukraine needs a focused and efficient strategy to tackle the power of oligarchs and diminish state capture. While the EU has long been aware of the connections between oligarchs, high-level officials, politicians, the judiciary and state-owned enterprises in Ukraine, it has not developed a real strategy for targeting grand corruption. For instance, illicit financial flows, including money-laundering, are addressed only at the margins.

EU has supported many anti-corruption reforms and activities in Ukraine. In most cases, the degree of support depends on a number of conditions being met. But the Commission has often interpreted such requirements too loosely, leading to over-positive assessments e.g.  the visa-free system as an example.

EU needs to rethink its strategical approach to fighting corruption in Ukraine and to focus on the root causes rather than on the symptoms.

The EU has continued to support reforms under Zelensky but there has not been any breakthrough. There have been some improvements like the set-up of the High Anti-Corruption Court, but also some reversals like the Constitutional Court rulings. The challenge is to continue the reform efforts and ensure that the anti-corruption agencies are operating efficiently and independently. That is still a tall order. Further anti-corruption efforts also have to be made in order to improve the business and investment climate in Ukraine. It is notably essential to reduce corruption in such sectors as customs and healthcare, to further strengthen corporate governance of state-owned enterprises and to ensure respect of property rights.

Recommendations from the European Court of Auditors (September 2021)

  1. Designing and implementing specific actions that target grand corruption, including a strategic document with key actions to take. Preventing oligarchs from entering the EU and using their assets there;
  2. Assessing and adjusting the scale of support for civil society organisations and investigative journalism;
  3. Contributing to removing impediments to free and fair competition, including avoiding supporting companies under oligarchic influence and support efforts to dismantle monopolies;
  4. Improving monitoring and public reporting system;
  5. Emphasise integrity and commitment to reform when providing capacity-building support for institutions;
  6. Support the digitalisation of registers;
  7. Include strict requirements for reforming the judiciary, prosecution services, and law enforcement agencies for Commission support.

Other Recommendations for EU Assistance (Chatham House)

1. The Support Group for Ukraine’s size, capacity and mandate should be strengthened so that it can work productively with the EU delegation and improve effective implementation of projects and programmes.

2. The EU’s grant assistance, especially for institution-building and sectoral reforms, should meet the following criteria:

  • It should only be given conditionally to carefully screened and designed projects. Reformers with a proven track record (including ex-government officials) must be involved.
  • It should be less prescriptive. This means addressing Ukraine’s specific problems rather than relying on terms of reference written by experts who are unfamiliar with the country context and who favour ‘best practice’.
  • Transfer of ‘best practice’ models should be restricted to technical programmes where the beneficiary institutions recognize and favour harmonization with specific EU rules or procedures.
  • Institution-building projects need to be less ambitious and granted a longer implementation period. The default period for implementation should be at least five years, in line with examples of other major donors.
  •  Such projects need to be less extensive and more intensive, with less focus on outputs and more on outcomes.
  • Assistance needs to be problem-driven and solution-focused to help solve the most urgent needs of institutions, and not be merely focused on training and the transfer of generic good practices.
  • The assistance needs to be longer-term and combined with other forms of support. This should be bolstered by an effective project information centre.
  • A premium should be placed on local knowledge and the capacity of experts to lead and engineer results, instead of focusing on detailed and prescriptive implementation of terms of reference. The selection of project personnel should prioritize those with ‘deep knowledge’ instead of those who are merely fluent in EU aid rules and procedures.

3. The European Commission and the European External Action Service should be flexible with EU delegations and allow them to pursue results instead of merely focussing on formal disbursement compliance.

4. On the monitoring side, it is time to conduct in-depth sectoral reviews of EU assistance to reforms in Ukraine over the past decade, in order to achieve a deeper understanding of the local context and to learn from past successes and shortcomings.

5. The European Commission should support a cost-benefit (impact) assessment based on the development of sectoral policies for integrating Ukraine into the EU and for building institutions to implement those policies. The European Commission should tie its assistance to implementation.

6. The implementation of the AA-DCFTA needs to be based on impact assessment studies in order to be realistic and pragmatic. Its technical components should take into account a wider spectrum of interests surrounding reforms during implementation

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