Zelensky presents Putin with PR gift

Zelensky has presented Ukraine’s European financial backers with a huge dilemma with his move against NABU and SAPO which has spurred big demonstrations in Kyiv and other cities.

This is obviously, and clearly, another set back in the fight against corruption. It is simply ridiculous for the new PM, Svyrydenko to argue that corruption is not that big a problem in Ukraine - sure the fight for survival against Russia is the number one challenge, but I would argue second is the fight against corruption - and I have covered Ukraine for over 35 years. And my various friends in military industrial production tell me that it is still a huge problem, and is undermining the war effort - if anything it is getting worse, with war time profiteering.

And sure we can accept some of the blame for high and engrained corruption in Ukraine over the years - Western banks and finance has helped facilitate it (by banking oligarchs et al) likely as more generally for global corruption, and the fact that Ukraine was never given a proper EU accession angle also set the country back in terms of corruption as it created a no man’s land in terms of policy, regulation, and oversight. But the harsh reality is that Ukraine does have a problem with corruption and denying it is counterproductive and damages Ukraine’s case for continued financial support.

Now in peacetime the West would have responded by stalling aid flows to Ukraine - IMF disbursements would have been stalled/suspended on this news. But with Ukraine currently the front line in Europe’s defence, it’s difficult - almost impossible - for Europe to make that decision. Aid flows will continue, as Europe has no choice but to fund Ukraine’s defence - as its best chance to stop further Russian expansion into Europe. There will though be intense diplomatic activity in the background with the message being that this is a PR gift to Putin and to those in the West (Tucker Carlson, Marjorie Green, Orban et al) who argue that Western taxpayers should not be funding Ukraine. The hope will be that Zelensky eventually backs down and compromises.

Notable that this comes as Ukraine, and the IMF, are figuring out that their existing financial projections which had the war ending in 2025 no longer make sense in a scenario where the war extends into 2026 and beyond. Ukraine needs more financing and the existing IMF EFF needs to be rejigged to better reflect its prior downside scenario. This means an additional $16 billion plus has to be found for 2026 and overall funding needs to be ramped back up to $100 billion plus for next year, plus a likely second round of debt restructuring. The furore now about Zelensky defanging the anti corruption agenda will likely complicate negotiations with the IMF and delay a new financial settlement, and that will be a gift to Putin.

Demonstrations now present a serious challenge for Zelensky - how is he going to manage them? Let’s hope he uses a soft touch and does compromise. The vision of mass demonstrations in Kyiv and other cities against Zelensky is a further gift to Putin. The gift will grow if Zelensky opts to tough it out or tries to use force to clear the streets. Putin and his agents in Ukraine will exploit all this to the full. But it was an own goal. and therein I just would like to ask Zelensky was this all really worth it, and who is now pulling the strings in the background in Kyiv? Is this another sign of the increasingly dominant position of Yermak, his chief of staff? And all this just presents the administration as being tone deaf.

Sad that all this has been a PR gift for Putin. I think he will look at this and conclude that Ukrainian society is dividend, and ready to collapse, and opt to fight in and not engage in serious negotiations.