Photographer: Andrey Rudakov/Bloomberg

Ukrainian Economy Minister Quits as Government Cracks Widen

  • Outgoing minister levels graft accusations as bonds slump
  • Post-revolution administration at odds over reform plans, war

Ukraine’s government, splintering over issues from the war in the nation’s east to faltering anti-corruption efforts, suffered a new setback as its reform-minded economy minister stepped down.

Aivaras Abromavicius, 40, a Lithuanian-born former fund manager, said Wednesday that he wouldn’t be a “puppet” for officials he accuses of blocking overhauls of the ex-Soviet republic’s economy and institutions. He said politicians, including one from President Petro Poroshenko’s party, had pressured him to appoint “dubious people” at state-controlled companies. Government bonds slumped after his comments.

Aivaras Abromavicius
Aivaras Abromavicius
Photographer: Eric Piermont/AFP via Getty Images

The minister’s departure underlines growing dysfunction in Ukraine, where memories of broken reform promises from the 2004 Orange Revolution persist. The administration that took power in 2014 after a wave of pro-European protests has become bogged down by infighting and criticism over failing to rein in the vested interests that have controlled much of the economy for decades. Poroshenko, who must deliver reforms to maintain the flow of financial aid from allies such as the U.S. and the European Union, has promised personnel changes in the cabinet this month.

“The allegations by Abromavicius are highly damaging for Ukraine,” Lilit Gevorgyan, senior economist at IHS Global Insight in London, said by e-mail. “To attract investors back, Poroshenko and his team need to demonstrate that the second revolution won’t be wasted on infighting and cosmetic changes, that they’ll uproot entrenched corruption and clean up the business environment. So far, the news isn’t entirely encouraging.”

Wednesday’s news brought losses for government debt. The yield on dollar-denominated bonds due 2019 jumped 45 basis points to 10.055 percent, the biggest daily increase in more than seven weeks on a closing basis. The hryvnia gained 0.6 percent to 25.75 against dollar, recovering from an 11-month low Tuesday.

‘Blatant Corruption’

Abromavicius, whose predecessor also left citing frustration over reforms, was one of several foreign citizens drafted into Ukraine’s post-revolution government as technocrats to add impetus to plans to steer the nation away from its Soviet past. Announcing his exit, he accused officials of seeking to gain control over cash flows at state energy producer NAK Naftogaz Ukrainy as well as government-run enterprises in the defense industry. Pressure tactics on him included pulling his family’s security detail, he said.

“My resignation hopefully will serve as a cold shower for the leadership of the country that something is going wrong,” Abromavicius said in an interview. “Over the past couple of weeks, I started to be intimidated. I started to be really pushed into a corner, forced to appoint some people who in my view have nothing to do in my ministry.”

Poroshenko said on Facebook that he told Abromavicius that he should stay, and that the minister would consider the proposal. The anti-corruption bureau said it would investigate the accusations.

‘Parochial Differences’

Geoffrey Pyatt, the U.S. ambassador in Kiev, described Abromavicius as “one of the Ukrainian government’s great champions of reform.” A joint statement from Pyatt and eight other ambassadors expressed disappointment at Abromavicius’s resignation, saying he’d “delivered real reform results” and promoted “openness and transparency.”

“It’s important that Ukraine’s leaders set aside their parochial differences, put the vested interests that have hindered the country’s progress for decades squarely in the past, and press forward on vital reforms,” the ambassadors said.

Ukraine’s efforts to stamp out corruption brought scant progress last year, according to Transparency International, which said in January that civil society, journalists and whistle-blowers were more effective than government officials in combating graft. The nation of 43 million people ranked 130th of 168 countries in the Berlin-based watchdog’s Corruption Perceptions Index, level with Iran and Cameroon.

Keep Fighting

The results of Ukraine’s anti-graft endeavors will be assessed by lawmakers during the week of Feb. 15, when Prime Minister Arseniy Yatsenyuk is scheduled to report to parliament on his cabinet’s performance. The premier, whose party won the biggest share of votes in elections in 2014, has seen his approval rating plummet to 1 percent as Ukrainians vent their disappointment and growing disillusionment following the revolution.

Yatsenyuk told a government meeting Wednesday that his team must push on with their program. The Finance Ministry struck a similar tone, with deputy minister Artem Shevalyov pledging on Facebook to “fighting and reforming as long as we can.”

While Abromavicius said his situation shows that technocrats can’t co-exist alongside “people with an old mentality,” he expressed hope that Ukraine can still complete the reforms he began.

“I am still optimistic,” he said. “Things can still go in the right direction.”

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