This year Europe and the United States have donated millions of dollars to Ukraine to fight COVID-19. In fact almost half of the funds were allocated not for medicines or medical equipment, but slip into the pockets of the Ukrainian construction firm’s cartel and foreign contractors.
The coronavirus pandemic continues to spread around the world and Ukraine is not the exception. There are reports from all over the country on overcrowded hospitals, problems with hospitalization, lack of necessary medicines and oxygen. This spring authorities created the fund totaling $2.3 billion specifically to fight the pandemic and its consequences. The fund consisted of money from the Ukrainian government, European Union, foreign states and grant organizations. Ukraine was provided with funds from the UN ($33 million), EU ($232 million), Germany ($181 million), United States ($15 million), Canada ($0.5 million) and even South Korea ($0.7 million). According to the open sources, international assistance amounted to $462 million, or at least 20% of the Ukrainian Coronavirus Fund. What is more, the EU agreed on an additional $1.5 billion lending program due to the pandemic.
In November a scandal broke out in the Ukrainian media. Former Finance Minister and Adviser to the Head of the Presidential Office Igor Umansky said that money from the Coronavirus Fund was allocated for the construction of roads under the presidential program Great Construction. On the threshold of a new lockdown and, as a result, a new wave of the financial crisis, the Ukrainian authorities allocated $1.2 billion to a populist project. At the same time, only $364 million was reserved for social payments, $570 million for health care, and $94 million for law enforcement.
Great Construction started in Ukraine in March. This is a joint project of President Volodymyr Zelensky and the Government of Ukraine funded by the state budget. The goal of the program is the construction and general maintenance of 6.5 thousand km of roads, 137 educational institutions, 116 kindergartens and 122 sports facilities. The planned budget together with money from the Coronavirus Fund is $4.4 billion. The President actively used the project to increase his own rating and the popularity of his political party in the run-up to the local elections in late October. Vladimir Zelensky has been visiting every region of the country, where among others he inspected the construction sites of the Great Construction. Such actions of the head of state angered both the opposition and public organizations. Chairman of the Committee of Voters of Ukraine Alexei Koshel noted that technically the president cannot be prosecuted for this, but his actions undermined the principles of democratic elections.
Obviously, the ruling party counted on the presidential project as a principal trump in the political struggle. Intensive construction in the regions made it possible to associate candidates from the Servants of People with large-scale road building; however, as it turned out after the Election Day, even such measures did not help the party to get the majority of votes.
Large contracts for local oligarchs
Igor Umansky also reported on large-scale corruption schemes in the project. The tender conditions were specially changed that only a limited number of companies or members of the so-called “road cartel” could participate. The former Finance Minister noted that six companies appropriated money from the Coronavirus Fund. According to the article by Nashi Groshi, he was talking about Avtomagistral-South, Onur, Avtostrada, Rostdorstroy, Altkom and Techno-stroy-center. From the beginning of the year to July they received 72% of contracts for the road building.
Ukravtodor quickly published a rebuttal. The department said that for the first time in Ukraine tender documents were not worked out for specific contractors, but for companies that have the appropriate experience, equipment, employees and financial support. In 2020, it allowed to attract more than 60 companies to work at the Great Construction sites. As of November 13, 20 contractors were doing contracts worth $35 million. The department claims that this fact completely excludes the possibility of cartel.
One way or another, the statement of the road department does not refute the existence of the cartel, which was mentioned by former Finance Minister Igor Umansky. In spite of the fact that the conditions of tenders have become more transparent for small firms, “road giants” from the article published by Nashi Groshi, still win the lion’s share of tenders.
Companies of the Odessa Mayor
One of the largest road construction and repair companies in Ukraine is Avtostrada-South. According to July data, the company won contracts totaling $220 million. Formally, the company belongs to Odessa residents Valery Korotkov and Oleg Nalivanny. At the same time, media reports that it is controlled by the inner circle of Odessa Mayor Hennadiy Trukhanov. The connection was revealed accidentally during one of the bids. Many participants took part in the tender, and one of them, Kyivshlyakhbud, filed a letter of guarantee where accidentally entered the title of the Avtostrada-South Company. Among the beneficiaries of Kyivshlyakhbud were Yuri Schumacher – a deputy of the Odessa City Council, a member of Trukhanov’s political party, and the famous businessman Alexander Zhukov. Media often call Yuri Schumacher “the main Trukhanov’s road worker”.
Another major’s road company from the list is Rostdorstroy LLC or RDS. From the beginning of the year till July the contractor won tenders totaling $63 million. The beneficiaries of the company are Evgeny Konovalov and previously mentioned Yuri Schumacher. The supplier of Rostdorstroy is Squo Company, which is controlled by Trukhanov’s daughter. Rostdorstroy appears in a number of criminal proceedings in Poltava, Cherkasy and Nikolaev regions. Rostdorstroy was accused of official negligence, poor-quality work, appropriation of funds, overestimation of materials and work, as well as forgery of documents.
The road cartel also includes the Avtostrada Company. According to information published by Nashi Groshi, the company won tenders totaling $161 million. Its owner is Maxim Shkil, founder of MS Capital Holding. Last year, Avtostrada was caught up in a scandal. Avtostrada was accused of arson attacks on competitor’s equipment. The director of the damaged company Poltavabudcenter then stated that corruption in the industry is supported at the Cabinet of Ministers of Ukraine, and Avtostrada is allegedly a contractor close to officials. In Avtostrada, these accusations were called an information attack. Maxim Shkil applied to the court and the defendant had to delete the publication.
In the Vinnitsa region, the company was accused of violating road construction standards and maximization the cost of projects. During the investigation crimes were not confirmed and the case was closed. Some media attribute this to the fact that the top manager of Avtostrada was Anatoly Vakar, who previously worked in the transport department of Vinnitsa region administration. The company also received most of the contracts in this region. Avtostrada declines any allegations of using an administrative resource.
Ukrainian oligarchs also benefited from the Great Construction. In November, it became known that tenders for road construction in the Carpathian region were won by PBS Company, which is closely connected to one of the most influential businessmen in Ukraine Igor Kolomoisky. The founder of PBS is a resident of Ivano-Frankivsk, Galina Nepik. Earlier, Nepik worked at the famous resort Bukovel, owned by the Privat Group belonging to Igor Kolomoisky.
The total amount of the bids under the Big Construction program in the Ivano-Frankivsk region amounted to $125 million. About $32 million of them were allocated directly from the Coronavirus Fund.
Coronavirus Fund for Turkish Firms
Builders of the Great Construction were not only prominent Ukrainian businessmen and oligarchs, but also foreign companies with a questionable reputation. Two Turkish companies Onur and Ozaltin won significant contracts from Ukravtodor in 2020.
Onur is a group of Turkish construction companies, which includes its Ukrainian division Onur Construction International. The company is one of six members of the cartel and, according to July data, won tenders totaling $91 million. The beneficiaries of Onur Construction International are Turkish citizens Onur and Ihsan Chetinjeviz. The company has been building and repairing roads in the country since the beginning of the century.
The Onur Group is successfully performing around the world, but in Ukraine it has a doubtful reputation. Law enforcement officers and public organizations have many questions about the work of the company. A number of criminal cases were instituted in Ukraine against Turkish company. Most of them were initiated over the embezzlement of state money, illegal mining of materials and forgery.
Another large foreign company at the Great Construction of President Zelensky is the Ozaltin company. According to July data, the Turkish contractor won tenders worth $38 million, but little has been done.
In September, journalists of the Perviy Zaporizhzhskiy visited the section of the М18 highway between Zaporozhye and Melitopol which is being constructed by Ozaltin. The company won a tender for the repair of 55 km of highway in the spring. In early autumn the contractor removed only 17 km of the old asphalt and the only 1 km was completely repaired. Journalists believe that the work will not be done by the end of the season. In addition, according to media workers, half of the company’s employees are foreigners while the country faces a 15 years maximum unemployment rate.
Ozaltin has come to Ukraine only this year right before the Great Construction began. The company did not submit leasing agreements for equipment, papers confirming the employment of some workers in the tender offer. However, Ukravtodor ignored violations and allowed the Turkish constructor to work in Ukraine.