If April was a bad month for those who want to see improving ties between Ukraine and the West, then May is shaping up to be an utter disaster.

Last month President Petro Poroshenko replaced Western-favored technocrats in a cabinet now stuffed with his allies. This development happened soon after he appointed his protégé, Volodymyr Groysman, as prime minister.

Western donors, who have been begging Ukraine to take reform seriously since the 2014 ‘Maidan’ protests, are still reeling from the loss of the prime minister, as well as the economy and finance ministers. On 12 May they received yet another slap in the face as Poroshenko appointed Yuriy Lutsenko, an ally with no legal training, as the nation’s new general prosecutor.

But these setbacks will likely not lead to any end of aid to Poroshenko’s regime. If anything, the West now receives routine reminders of just why they needed to support the regime in the first place. On 28 April, the OSCE’s chief monitor reported that ceasefire violations in Donetsk, a hotbed of pro-Russian separatism, have soared to “worrying” levels that are unmatched in recent months.

A commitment to amend Ukraine’s national constitution and decentralize its government would be a highly effective way to ease the tensions in Donetsk and throughout eastern Ukraine. But entrenched political interests have stalled any such progress, while the ongoing conflict provides an effective excuse for the President and his allies to avoid any further political reforms.

- Advertisement -

Panamanian Déjà vu

This worsening trend become even more apparent last week, when a new set of ‘Panama papers’ were released. The new batch illustrates further benefits that have accrued to Poroshenko’s administration from the type of offshore accounts the President claims to be cracking down on.

Among the 11 ½ million files initially leaked were documents showing that Poroshenko hired the now-infamous Panama-based law firm, Mossack Fonseca, that is at the heart of the firestorm. In 2014, Mossack was retained to register a company called Prime Asset Partners Limited in the British Virgin Islands. Two more offshore companies were also linked to the companies in his candy-producing business empire – CEE Confectionery Investments Limited (Cyprus) and Roshen Europe BV (Netherlands).

The leaks prompted the Austrian Financial Market Authority to investigate Raiffeisen Bank’s Ukrainian subsidiary over anti-money laundering violations related to US$ 115 million of loans to Poroshenko’s flagship confectionery company, Roshen, via British Virgin Islands-registered Linquist Services Limited.

Broken Promises

Concerns over money-laundering and tax avoidance in Ukraine are undoubtedly serious, but the Panama Papers and the Austrian investigation also shine a glaring light on a core campaign promise the President has yet to fulfill: namely, the sale of his private assets.

Although Poroshenko refused to give up his Channel 5 TV station (media interests are highly coveted assets within the oligarchy), he vowed to sell his remaining interests, beginning with Roshen.

Now, two years on, Poroshenko is one of the few Ukrainian oligarchs to have seen his wealth actually increase since the Maidan protests that brought him to power and his country to civil war.

While there is little mention in the Panama papers of Poroshenko’s other commercial interests, he remains the sole shareholder in Prime Assets Capital ZNKIF AT, according to corporate registrations as of April 2016. His father, Oleksiy Poroshenko, is the company’s Chairman.

Along with Roshen, other entities held under Prime Assets include majority stakes in Central European Confectionary Company, Kiev-based International Investment Bank, Sevastopol Marine Plant and Bogdan Automobile Group.

Gray Cardinal

Among the companies’ beneficiaries is Poroshenko’s long-time business partner, Ukrainian Minister of Parliament Ihor Kononenko, who is listed as a shareholder in nine companies with Poroshenko, including International Investment Bank and Bogdan. Known as the president’s “gray cardinal” in the Verkhovna Rada, or Parliament, Kononenko remains an influential political player in the cabinet and Prosecutor’s Office.

Kononenko is no stranger to corruption scandals. In October 2015, the former head of Ukraine’s Security Service, Valentyn Nalyvaichenko, accused Kononenko of money laundering via his company, UkrPromInvest, which he created with Poroshenko in 2005.

There are uncorroborated reports that the Austrian authorities have opened an investigation into Kononenko for his involvement in large-scale money laundering. Yet given his close ties to President, Kononenko is unlikely to face much scrutiny by Poroshenko’s new Prosecutor General, Yuriy Lutsenko.

Yet aside from a few scattered calls for impeachment within the Parliament, and occasional reminders from the press that Poroshenko has yet to sell his private assets, the latest revelations have failed to stir up street-level activism or marches tore-occupy the Maidan. Put simply, this latest revelation from the Panama papers has laid bare the signs of anti-corruption fatigue.

Ordinary Ukrainians seem to have resigned themselves to abject pessimism that the country can ever shake the legacy of its dysfunctional political past; namely, the marriage between business and politics. Boundaries between the two disciplines are nearly indistinguishable – political elites rely on the oligarchy to secure their positions, and protect them from investigations. In turn, the oligarchy enriches the politicians while both share in the redistribution of state wealth. These two worlds have been closely intertwined for decades. Poroshenko may not have created this monster, but he has ensured the system flourishes.

Russian Crackdown

Even after delivering billions of dollars of aid to a country on the brink of collapse, would-be Western reformers have found it impossible to break this cycle.

In fact, the only successful case against Poroshenko’s business empire has been in Russia, where the authorities seized $40 million of Roshen assets in Lipetsk a year ago. More recently, Roshen lost a court case against Russia’s Federal Tax Service. This fact is not lost on those in the Crimea, or in eastern Ukraine, who remain steadfast in their support for increased Russian influence over their homeland.

Overwhelmingly, Ukraine’s oligarchs continue to influence political decision-making in parliament and the government. And recent events have made it increasingly evident that Poroshenko is leading the pack.

The author is Michael Mesquita, a Senior Analyst (CIS) at West Sands Advisory Limited. Michael is involved in a long-standing project focused on investigating the intricacies of informal elite networks of power in the CIS, and how these networks exert influence.

West Sands Advisory Limited is a business intelligence, investigations and political advisory firm that has, since 2006, helped clients identify opportunities and reduce risk in emerging and frontier markets.