Zelensky’s Government Sabotaged Oversight, Allowing Corruption in Ukraine to Fester
When Russian troops invaded Ukraine, Kyiv’s Western allies faced a dilemma: how to spend billions supporting a government fighting Russia without watching the money vanish into the pockets of corrupt managers and government officials.
The stakes were high because Ukraine’s vital wartime industries — power distribution, weapons purchases and nuclear energy — were controlled by state-owned companies that have long served as piggy banks for the country’s elite.
To protect their money, the United States and European nations insisted on oversight. They required Ukraine to allow groups of outside experts, known as supervisory boards, to monitor spending, appoint executives and prevent corruption.
Over the past four years, a New York Times investigation found, the Ukrainian government systematically sabotaged that oversight, allowing graft to flourish.
President Volodymyr Zelensky’s administration has stacked boards with loyalists, left seats empty or stalled them from being set up at all. Leaders in Kyiv even rewrote company charters to limit oversight, keeping the government in control and allowing hundreds of millions of dollars to be spent without outsiders poking around.
Supervisory boards serve an essential oversight function, allowing independent experts, typically from other countries, to scrutinize major decisions inside Ukrainian state-owned companies.
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They are also central to the corruption scandal swirling around Mr. Zelensky’s government. Anti-corruption authorities have accused members of his inner circle of siphoning off and laundering $100 million from the state-owned nuclear power company, Energoatom.
Mr. Zelensky’s administration has blamed Energoatom’s supervisory board for failing to stop the corruption. But it was Mr. Zelensky’s government itself that neutered Energoatom’s supervisory board, The Times found.
In documents and interviews with about 20 Western and Ukrainian officials who have worked closely with company boards or served on them, The Times found political interference not only at Energoatom but also at the state-owned electricity company Ukrenergo as well as at Ukraine’s Defense Procurement Agency. Some people spoke on condition of anonymity to discuss confidential deliberations.
An adviser for Mr. Zelensky declined to comment, saying that the supervisory boards were not the president’s responsibility.
European leaders have privately criticized but reluctantly tolerated Ukrainian corruption for years, reasoning that supporting the fight against Russia’s invasion was paramount. So, even as Ukraine undermined outside oversight, European money kept flowing.
“We do care about good governance, but we have to accept that risk,” said Christian Syse, the special envoy to Ukraine from Norway, one of Kyiv’s top donors. He added: “Because it’s war. Because it’s in our own interest to help Ukraine financially. Because Ukraine is defending Europe from Russian attacks.”
The political meddling with Energoatom’s supervisory board is a case study in how Ukraine’s leaders have blocked efforts to prevent corruption. The Zelensky administration delayed the formation of Energoatom’s board and, when it finally came together, the government left a seat empty — impeding the board’s ability to act.
Had the board worked normally, it might have curtailed what the authorities now say was rampant corruption. Contractors on Energoatom projects had to pay kickbacks of up to 15 percent, according to investigators.
Mr. Zelensky was elected in 2019 on a promise to eliminate graft. But after Russia’s 2022 invasion, he relaxed anti-corruption rules in the name of speeding up weapons procurement and protecting military secrets. Mr. Zelensky also worked with political and business figures that he had once declared to be criminals.
The Energoatom scandal has hamstrung Mr. Zelensky politically and weakened his case for Ukraine to join the European Union and NATO, two institutions wary of adding a member that is dogged by corruption. Mr. Zelensky sees those memberships as key to his country’s future.
If it does not clean up corruption, Kyiv also might not receive the hundreds of billions needed to rebuild the country after the war. “There will be more hesitation to dedicate big funding,” said Arvid Tuerkner, managing director for Ukraine at the European Bank for Reconstruction and Development, one of Kyiv’s largest financial backers.
How to Hijack a Board
The Zelensky administration began meddling in Ukrenergo, the country’s power grid operator, a few months before the war, Volodymyr Kudrytskyi, the company’s former chief executive, recalled in interviews.
In late 2021, he said, he began receiving calls from Herman Halushchenko, who had recently been appointed Mr. Zelensky’s energy minister. Mr. Halushchenko wanted Mr. Kudrytskyi to hire people to management roles who had limited experience in the energy business.
“He started insisting,” Mr. Kudrytskyi said. “He started aggressively trying to make me appoint them.”
Mr. Halushchenko did not respond to repeated requests for comment.
The budgets of state-owned companies like Ukrenergo have historically been major targets for corrupt politicians, so Mr. Kudrytskyi was suspicious. He said he successfully resisted the pressure because he had the backing of his supervisory board.
Ukrenergo’s board is made up of seven people who oversee major projects and executive appointments. The government picks the supervisory board members, but four are foreigners chosen from a shortlist made by the European Union and Western banks. The other three seats go to Ukrainian government representatives.
The principle is that independent expertise will always outvote government interests.
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By late 2021, Ukrenergo’s board was expiring. European and Ukrainian officials began meeting to consider new members. They did not realize it at the time, European officials say, but they now think that the Ukrainian government hijacked that board and, in doing so, established a playbook to use with other companies.
The first sign that something was amiss came after the European Union, the World Bank and the European Bank for Reconstruction and Development submitted their shortlist.
Rather than pick exclusively from that list, the Ukrainian Energy Ministry, under Mr. Halushchenko, insisted that one of the seats go to Roman Pionkowski, a Polish energy expert who had worked on consulting projects in Ukraine, two officials said. They said that Mr. Pionkowski had interviewed for the job but was rated too low to make the shortlist.
Western officials were surprised but accepted Mr. Pionkowski’s nomination as one of the four foreign experts. The new board was seated in December 2021.
Then the Russians invaded. Ukrenergo soon faced sustained attacks on energy infrastructure.
Under Mr. Kudrytskyi’s leadership, Ukrenergo made repairs around the clock, allowing it to maintain the country’s power supply. The company also became a trusted partner for Western donors, who gave it $1.7 billion in loans and grants in the first years of the war.
Political pressure continued, Mr. Kudrytskyi said. Government officials accused him of failing to protect energy infrastructure. Though he had the support of European countries, he clashed with Mr. Halushchenko, who wanted him fired.
This time, Mr. Kudrytskyi did not have the board’s protection. One foreign member had resigned for personal reasons and the government never filled the seat, leaving an even split between foreign experts and state representatives.
That tie should have been enough to save Mr. Kudrytskyi’s job. But Mr. Pionkowski, the Polish expert, sided with the Ukrainians and voted to fire him.
Mr. Pionkowski defended his independence. He said he did not take orders from Kyiv. He voted for dismissal, he said, because Mr. Kudrytskyi had repeatedly misled the board. He did not provide details.
The two other foreign board members resigned in protest, issuing a statement calling the dismissal “politically motivated.”
But European donors — the banks, central governments and international institutions that are helping to bankroll Ukraine — did little. The reconstruction bank froze new payments to Ukrenergo but honored ongoing commitments. In European capitals, nobody wanted to pull financial support and appear as if they were turning their backs on Ukraine, according to four European officials.
Mr. Kudrytskyi said that none of this was about energy policy. He said that the Energy Ministry had wanted to make it easier for corruption to go unchecked.
For example, Mr. Kudrytskyi said, one of the men he had refused to hire is now under investigation in the Energoatom case and has reportedly left Ukraine.
And Mr. Halushchenko recently resigned amid the investigation into his role in that scandal.
Behind the Scenes of a Scandal
As Mr. Halushchenko tried to seize control at Ukrenergo, he also pushed a major spending plan at Energoatom.
He wanted to buy two old Russian-designed nuclear reactors from Bulgaria. Mr. Halushchenko wanted to move them to a nuclear plant in western Ukraine, bring them back to life and connect them to the energy grid.
Energoatom counted on Western partners to help finance the $600 million project.
Western donors and anti-corruption watchdogs immediately criticized the idea. The project, they said, had all the hallmarks of a boondoggle at one of Ukraine’s most notoriously corrupt state-run firms.
The reactor project came together just as the Ukrainian government was approving Energoatom’s first supervisory board. An incoming board member, Tim Stone, a British businessman with a background in finance and nuclear energy, said that he had planned to order a review of what he called the “Franken-reactors.”
But the Ukrainian authorities stalled the board contracts. Kyiv blamed disputes over pay and insurance. European officials and some Ukrainian lawmakers said they saw another reason.
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“They understood that as soon as they start the activities of the supervisory board they can lose control,” said Oleksii Movchan, a lawmaker from Mr. Zelensky’s party who has pushed for independent boards. “They didn’t want to lose control.”
While Energoatom’s board remained inactive, anti-corruption investigators say, Ukrainian officials were orchestrating a $100 million kickback scheme at the company.
On Dec. 12, 2024, about a year after the board was supposed to have started work, ambassadors from Ukraine’s top allies, including the United States and Britain, pressed the government to form the board.
“This is especially important when Energoatom is considering new large long-term financial investments and liabilities,” they said in a letter obtained by The Times.
With the board still unsettled, Dr. Stone walked away. “The whole thing was just a complete rat’s nest,” he said.
When Ukraine finalized the board in January, it kept Dr. Stone’s seat empty, leaving the board with an even split — two foreign experts and two Ukrainian representatives.
The reactor deal is on hold and is not part of the graft investigation. But the resulting split in the board left Energoatom largely powerless to prevent corruption. It could not change the company’s top managers, one of whom was suspended amid the kickback investigation.
Eight people, including Mr. Zelensky’s former business partner, are accused in that case of charges including embezzlement, money laundering and illicit enrichment. Mr. Zelensky’s right-hand man quit after his home was raided, but he has not been charged. A former deputy prime minister was accused of pocketing more than $1.3 million.
Rewriting the Rules on Defense Procurement
More than a year into the war, after a scandal erupted over inflated defense contracts, donors pushed Kyiv to create an independent agency to clean up weapon purchases.
Yet, since its start in January 2024, the agency has spent at least $1 billion in European money either with an incomplete supervisory board or without one at all.
Maryna Bezrukova, the agency’s first head, said that the absence of a board during her first year in the job left her vulnerable to pressure from the Zelensky administration. She said the Defense Ministry had pushed her to approve dubious contracts, including one with a state-owned weapons factory that could not effectively produce mortar shells.
Under pressure, she signed off. Many shells failed to fire, prompting a public outcry in the fall of 2024.
The ministry turned on Ms. Bezrukova, accused her of failing to deliver weapons quickly to the front. But the question of whether to fire her was one for the supervisory board, which was finally coming together last December.
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On the eve of the first board meeting, the Defense Ministry rewrote the procurement body’s charter, granting itself authority over hiring and firing the agency’s head. The board protested the meddling and renewed Ms. Bezrukova’s contract for another year.
The Zelensky administration was undeterred. When a foreign expert resigned, leaving two foreigners and two government representatives on the board, the administration had an opening. It fired the two government members, leaving the board without a quorum.
Powers were transferred to the Defense Ministry. Ms. Bezrukova was fired early this year.
“Supervisory boards are just window dressing,” she said in an interview. “They’re not real.”
The Defense Ministry did not reply to requests for comment. It has said it acted legally and in the interest of improving weapon procurement.
The government’s move against the procurement agency coincided with Mr. Trump’s return to power and Washington’s gradual disengagement from the war. That shift, European officials said, emboldened the Ukrainian authorities to remove anti-corruption guardrails.
The Zelensky administration quietly asserted control by rewriting the charters of state companies, including Ukrenergo, to give itself new powers or to change the voting process. The government also tried, unsuccessfully, to defang the anti-corruption agencies while they were investigating Energoatom.
With the United States retreating, Europe is left to confront Kyiv’s handling of corruption. But so far, “the Europeans are creating a permissive environment for this kind of backsliding,” said Tyson Barker, a former State Department official overseeing Ukraine’s economic recovery.
The European Commission, the administrative arm of the European Union, quietly commissioned a report this year into corruption risks in Ukraine’s energy industry. A copy of the report, obtained by The Times, warned of “persistent political interference.” The report, by the Ukrainian Facility Platform, a nonprofit research group, singled out Kyiv’s undermining of supervisory boards as a critical problem.
A spokeswoman for the European Union said officials have pressed Ukraine to reform its state-owned businesses. There’s no evidence that European Union money was misused, she said.
She did not address what the investigation reveals about corruption in Ukraine.
Mr. Zelensky has tried to distance himself from the growing scandal. In response to the controversy, his prime minister denied any government interference with Energoatom’s supervisory board.
She blamed the board for not stopping corruption.
And she fired all its members.
Constant Méheut reports on the war in Ukraine, including battlefield developments, attacks on civilian centers and how the war is affecting its people.
Kim Barker is a Times reporter writing in-depth stories about the war in Ukraine."
Zelensky’s Government Sabotaged Oversight, Allowing Corruption in Ukraine to Fester - The New York Times
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