Why EU’s Borrell personally discusses corruption with Kyiv officials – expert interview

NV: There were reports that [state nuclear operator] Energoatom purchased petroleum products last month, in particular diesel, at prices that were 10% higher than those purchased by Ukrainian Railways [UZ] and [water supply company] Kharkivvodokanal at the same time. What’s going on?

Nikolov: In this case, Energoatom allowed itself actually normal bidding, and there was competition. It’s just that this tender was preceded by a long history of other tenders, in which, you know, it wasn’t about 10%, not 5%, but we saw price gouging on construction projects by one and a half, two times, and two and a half times. In this case, Energoatom has actually acted responsibly. It just didn’t do it as well as other state enterprises did.

I received their reaction literally this morning. They still insist that they bought [diesel] even cheaper than that. Let’s move to the plane of determining fuel density to understand how they get such a price in liters. It will be interesting. But I emphasize: it’s a long story of how we caught them in almost every tender for the last year, how they stopped providing us with estimates upon request. They just started hiding all the documents, everything they could.

In our country, even the lawmakers were refused construction estimates. It lasted until August. However, I learned in September that after yet another outrageous incident with concrete prices being inflated several times, the head of [Energoatom’s] purchasing department, Mr. [Mykola] Bozhko, had been suspended from work and an official investigation had been launched. And after that, I can say that it calmed down. The diesel story is already, you know, barely an echo of what happened before.

NV: All these stories about tenders and procurements, they don’t go away so easily. As far as I understand, this is a matter of interest for our Western partners. Can you share the details of those conversations about the above construction estimates with EU’s High Commissioner for Foreign Policy Josep Borrell?

Nikolov: All those stories are connected. And this is absolutely logical since, relatively speaking, there are now the three largest cash flows on state procurements in Ukraine. The first is military procurement, both of weapons and other items. This is the largest expense. And there, I want to say absolutely responsibly, we managed to significantly reduce the margins thanks to our investigations. That is, significant savings have been achieved on many different things. And I really hope that our intelligence and counter-intelligence officers, special services, and not only ours, but also foreign ones, also control the weapons segment, which is, of course, inaccessible to civilian journalists.

Secondly, large flows of money go into the energy infrastructure. Also, very large flows go towards civil construction: residential buildings are being rebuilt, schools are being built after Russian attacks, or something big is being built for the internally displaced people. It’s just that these large flows coincided, the second and third: energy infrastructure and construction. And it’s logical that in a country that has suffered from Russia shelling a bunch of critical infrastructure we’re investing in some kind of reconstruction.

We saw with our own eyes in the estimates available through the Prozorro transparent procurement platform how literally hundreds of millions of hryvnias end up in construction tenders. It may look like some regional administration is rebuilding a hospital for UAH 200 million ($5.4 million), or Energoatom is repairing the roof of the Khmelnytskyi Nuclear Power Plant for UAH 100 million ($2.7 million), or arranging lighting.

That is, it looks like some necessary objects. But each such construction object actually consists of the same building materials. Maybe it differs by brand. But concrete, steel rebar, and bricks are needed everywhere, as well as windows to put in the destroyed houses.

And that’s how it turned out that we have a very gigantic flow of funds directed precisely to these construction projects, which consist of quite similar building materials. And these building materials are always recorded in estimates. There is such a universal document that should be disclosed.

Many of these projects don’t publish construction estimates so that we don’t see the price of concrete, relatively speaking. This is already becoming a critical story. The sums spent on all this from the state and local budgets are so large that, of course, they already affect financial assistance from allied countries. Remember, [Ukrainian President] Volodymyr Zelenskyy has recently said that if something is stolen on procurement in Ukraine, it’s not from the money of donor countries, but from the Ukrainian budget, i.e., from the money of our taxpayers.

NV: And is it a little less bad to steal your own than someone else’s?

Nikolov: Yes, not to upset allied countries. Unfortunately, the bad news is that Ukrainian taxpayers’ money is already assistance from donor countries. Since the donors had provided us with, let’s say, $2 billion, these dollars were converted into hryvnias in Ukraine, state employees were paid salaries, then state employees paid taxes, and this has already become the money of Ukraine’s state budget. In fact, in a country that depends on foreign aid for at least 60% of its expenses, Ukrainian funds are already running low. And in any case, they become the subject of interest of Western partners since they expect results from us.

All my experience from the investigations that we launched regarding “eggs for UAH 17” has proven that Western partners react very well when Ukraine makes a mistake, and then corrects it. And the reaction is correct, including investigations, detentions, resignations, etc. But when our government begins to pretend that nothing happens and let’s discuss it less, just so that there are fewer such messages, this is the wrong reaction. The system is not characterized by mistakes, the system is characterized by reacting to the mistakes.

And it was perfectly seen from the reaction of our partners. But later, you know, our government again started to play such pre-war role-playing games. And the West started this pressure. That’s why this conversation arose even at the level of Mr. Borrell about the fact that, guys, we give you billions, but you continue bad practices. It’s wrong.

This is how I think about it: even if you stop embezzling in Energoatom, but billions are still being embezzled at the level of regional administrations, well, sorry, what is the difference that you’re stealing money not from your left pocket, but from the right one?

NV: And the fact that the situation has reached Borrell. What was the reaction, what has it led to?

Nikolov: First, it hasn’t yet led to anything since the meeting with Mr. Borrell took place only this past weekend. And he, of course, as a diplomat was able to operate with completely different knowledge. That is, his organic human reaction was to ask what do you mean? And let’s just say, I got the impression that we were heard. And what’s more, I understand that Ukraine has now an opportunity to change the rules of the game so that we become, perhaps, even the first country in the world to reveal these state construction estimates.

To make them public through the Prozorro system so that everyone could see not only the order to repair the hospital for UAH 200 million, but also the price of bricks used in the project.

We don’t demand that all construction plans are published. No, it’s about the publication of several pages that the price of bricks in this contract is as follows, the price of concrete is as follows, the price of windows is as follows, and the windows are as follows. That’s it.

NV: The U.S. State Department spokesperson Matthew Miller says Ukraine has been taking aggressive measures to fight corruption in recent weeks and calls to continue doing so. Do you know which steps he meant exactly?

Nikolov: Unfortunately, I’m not in direct contact with the U.S. Department of State.

NV: But you’re definitely in Ukraine’s information field and can at least assume what has happened that the Department of State is declaring this?

Nikolov: According to the information I have, what is happening in my favorite layers of the corrupt “deep state,” this middle management, when there are several heads of administrations, departments, etc., between the minister and ordinary employees. These are the bearers of the institutional memory of corrupt practices. Ministers may change, but a newcomer comes in and often becomes the same as his predecessors. The recent changes began to occur in precisely this kind of mid-level oases. I’ve already said that at least Energoatom’s head of procurement department was suspended.

Yes, of course, this is only part of what is required, including an investigation, a trial, and a verdict. It had been going on there for too long. And, relatively speaking, it turns out that only under the pressure of the United States, Energoatom even [created] a one-person position, whose functions are only to sign documents. Unfortunately, this is not yet a solution, but the process has started. Secondly, the Ukrainian Railways (UZ) security service’s management has been replaced. I think this is a very important story because as far as I remember, it was led by a former colonel or general associated with the SBU security service. The fact that he was at the helm allowed Ukrzaliznytsia employees to continue arranging some, let’s call them, mysterious purchases with large margins.

Therefore, he managed his department badly if he didn’t see it. And literally yesterday, it became officially known that a detective of the National Anti-Corruption Bureau of Ukraine, who investigated corruption at UZ in recent years, had become the new head of UZ security service. That is, a person who is objectively and professionally aware of what he will deal with from the inside. I also see that in the largest procurements, where in previous years I simply got used to the fact that you open any tender for Ukravtodor [state agency of motorways] or the Defense Ministry, or some other large customer, and someone put a stick in there, and it sprouted green immediately. Like Ukrainian black soil, our land is rich in corruption.