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Top U.S. Official: Ukraine Reforms Endangered By Oligarchs Fighting Back

U.S. Assistant Secretary of State for European and Eurasian Affairs Victoria Nuland (file photo)
U.S. Assistant Secretary of State for European and Eurasian Affairs Victoria Nuland (file photo)

WASHINGTON -- A top U.S. administration official has taken pointed aim at the wealthiest Ukrainian tycoons, known as oligarchs, accusing them of undermining the country's anticorruption reform efforts.

Victoria Nuland, assistant secretary of state for European аnd Eurasian Affairs, warned on March 15 that, if efforts to liberalize the economy and fight endemic graft fail, Ukraine "risks sliding backwards once again into corruption, into lawlessness, into vassal statehood."

"The oligarchs and the kleptocrats who controlled Ukraine for decades know that their business model will be broken if the Maidan reformers succeed in 2016," she told the U.S. Senate Foreign Relations Committee in reference to the uprising that pushed out Ukraine's pro-Russia government two years ago.

"So they're fighting back with a vengeance, using all the levers of the old system: their control of the media, state-owned enterprises, [parliamentary] deputies, the courts, and the political machinery," said Nuland, a leading U.S. official on Ukraine.

The comments by Nuland and those made recently by other officials, including Vice President Joe Biden, signal concerns that Ukrainian President Petro Poroshenko and Prime Minister Arseniy Yatsenyuk aren't moving fast enough to overhaul key industries, ministries, and state agencies.

Considered to be among the world's most corrupt countries, Ukraine's economy has long been dominated by businessmen who control valuable assets and enterprises, many acquired under dubious circumstances.

In the months following the Euromaidan revolution that ousted Viktor Yanukovych as president in February 2014, Poroshenko -- himself a wealthy businessman -- turned to oligarchs to help stabilize regions in the country's east, where a Russia-backed separatist movement erupted into full-scale civil war.

'De-Oligarching' The Economy

As Kyiv has embarked on reform efforts, however, many of those oligarchs have maintained control of their holdings despite public sentiment and international pressure for Poroshenko to rein them in.

In recent weeks, the government has been roiled by resignations of several reformist ministers, including Economy Minister Aivaras Abromavicius, who has accused a well-connected Poroshenko ally of trying to install his supporters as the heads of important state-run industries.

In addition, Western officials pushed for months for the resignation of Prosecutor-General Viktor Shokin, who was accused of being incapable of reforming his office, seen as one of the country's most corrupt.

Shokin stepped down in February on the same day that Ukraine's parliament narrowly defeated a no-confidence vote in Yatsenyuk's government.

The International Monetary Fund (IMF) has warned that the latest installment of its $40 billion aid program, which has been instrumental in stabilizing Ukraine's anemic economy, could be held up unless changes are made.

"Every week that Ukraine drifts internally, that reform is stalled, IMF and international support goes undisbursed, and those in and outside the country who preferred the old Ukraine grow more confident," Nuland said on March 15.

"We need to see the next stage in 'de-oligarching' the economy," she added.

Nuland cited some small economic successes in Ukraine over the past year, including a stabilized currency, growth in wheat exports, and the fact that the country managed to avoid using Russian natural gas this winter for the first time -- something she called "pretty miraculous."

Russia has traditionally been able to use its gas supplies as leverage against Kyiv, but Ukraine managed to draw on European sources in the past year.

Despite her criticisms, Nuland gave an upbeat assessment of Ukraine's ability to move forward with reforms.

"We continue to believe that 2016 can and should be the year that Ukraine breaks free from the unholy alliance of dirty money and dirty politics that has ripped off Ukrainians for far too long," she said.

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    Mike Eckel

    Mike Eckel is a senior correspondent reporting on political and economic developments in Russia, Ukraine, and around the former Soviet Union, as well as news involving cybercrime and espionage. He's reported on the ground on Russia's invasion of Ukraine, the wars in Chechnya and Georgia, and the 2004 Beslan hostage crisis, as well as the annexation of Crimea in 2014.