Report on Corruption in Ukrainian Defense Procurement and Implications for Sustainable Development

Executive Summary

On August 2, Ukraine’s National Anti-Corruption Bureau (NABU) and the Specialized Anti-Corruption Prosecutor’s Office (SAPO) exposed a significant bribery and embezzlement scheme involving military procurement. The case highlights critical challenges and progress related to Ukraine’s commitment to Sustainable Development Goal 16 (Peace, Justice and Strong Institutions), particularly its targets on reducing corruption and building effective, accountable institutions. The scheme involved the misappropriation of state funds allocated for drones and electronic warfare (EW) equipment, implicating a Member of Parliament, government officials, and members of the National Guard.

Investigation Details and Contravention of SDG 16

The investigation reveals a systemic failure in institutional integrity, directly undermining the objectives of SDG 16. The organized group’s activities represent a severe breach of public trust and a significant impediment to sustainable development.

H3: Parties Implicated in the Scheme

• A Member of Parliament from the Servant of the People party, identified as Oleksii Kuznetsov.
• A former governor of Luhansk Oblast, identified as Serhii Haidai.
• Current heads of a district and a city military administration.
• The head of a National Guard military unit.
• The director of a private drone supply company.

H3: Modus Operandi and Illicit Financial Flows

The investigation uncovered systematic corruption that directly violates SDG Target 16.5 (Substantially reduce corruption and bribery) and SDG Target 16.4 (Significantly reduce illicit financial flows). The methods included:

1. Systematic appropriation of government funds allocated for military needs during 2024-2025.
2. Inflating the price of a state contract for EW systems to receive a kickback equivalent to 30% of the contract’s value.
3. Employing a similar price inflation strategy for a state contract for first-person-view (FPV) drones.

As of the reporting date, four individuals have been detained in connection with the scheme.

Institutional Response and Commitment to Accountability

The response from Ukrainian authorities demonstrates an effort to enforce accountability and strengthen institutional frameworks, aligning with the principles of SDG 16.6 (Develop effective, accountable and transparent institutions).

H3: Actions Taken by Government and Security Bodies

• Parliamentary Faction: The head of the Servant of the People faction, David Arakhimia, announced that the implicated MP would be dismissed from the faction pending the investigation’s outcome.
• Cabinet of Ministers: An extraordinary meeting was convened, resulting in a recommendation to President Zelensky for the dismissal of Serhii Haidai from his current post as head of the Mukachevo district administration.
• National Guard: Interior Minister Ihor Klymenko confirmed that the suspected officials have been removed from their posts. An internal investigation has been launched, and systemic safeguards are being developed to prevent future abuses of power and ensure that leadership positions are held by combat officers.

Legislative Context and Challenges to Institutional Independence

The investigation occurs within a complex legislative environment concerning the independence of Ukraine’s anti-corruption bodies, a cornerstone for achieving SDG 16.

H3: The Role of Anti-Corruption Agencies

The exposure of this scheme shortly followed the signing of a law on July 31 restoring the independence of NABU and SAPO. This legislative action, which reversed a previous controversial law, is a critical step toward ensuring these bodies can operate effectively and independently, a prerequisite for building the strong institutions envisioned in SDG 16.

H3: Concerns Regarding Institutional Separation

President Zelensky publicly praised the work of the anti-corruption bodies, emphasizing the importance of their independence. However, it was also reported that the heads of NABU and SAPO privately briefed the President on the investigation’s findings. This action raises questions regarding the operational separation between the executive branch and supposedly independent anti-corruption institutions, highlighting ongoing challenges in fully realizing the principles of SDG Target 16.6. The previous law, which prompted protests, was criticized for potentially requiring anti-corruption agencies to seek approval from the President’s administration before investigating high-ranking officials.

Conclusion: Corruption as a Barrier to Sustainable Peace and Development

This case serves as a critical indicator of Ukraine’s ongoing struggle to uphold the rule of law and combat corruption. The actions of NABU and SAPO are a positive step towards accountability. However, the systemic nature of the scheme and the surrounding political context underscore the profound challenges to establishing the strong, transparent, and accountable institutions required by SDG 16. Successfully prosecuting this case and implementing systemic reforms are essential not only for national security but also for maintaining the trust of international partners (SDG 17: Partnerships for the Goals) and ensuring that public resources are directed toward sustainable and equitable development for all citizens.

1. Which SDGs are addressed or connected to the issues highlighted in the article?

SDG 16: Peace, Justice and Strong Institutions

• The article’s central theme is the fight against corruption within state institutions in Ukraine. It details the exposure of a bribery scheme involving government officials and the military, the role of anti-corruption agencies (NABU and SAPO), and the government’s response to these criminal activities. This directly relates to SDG 16, which aims to promote peaceful and inclusive societies for sustainable development, provide access to justice for all, and build effective, accountable, and inclusive institutions at all levels.

2. What specific targets under those SDGs can be identified based on the article’s content?

SDG 16: Peace, Justice and Strong Institutions

1. Target 16.5: Substantially reduce corruption and bribery in all their forms.
   • The article explicitly discusses the exposure of a “bribery scheme” and an “organized corruption ring” involving a member of parliament, officials, and the National Guard. The scheme involved appropriating government funds and receiving kickbacks, such as one “worth 30% of the contract” for EW systems. The entire investigation by NABU and SAPO is an action aimed at achieving this target.
2. Target 16.6: Develop effective, accountable and transparent institutions at all levels.
   • The article highlights the importance of Ukraine’s “principal anti-corruption bodies,” NABU and SAPO. The passing of a law to restore their independence is a key step toward building effective institutions. Furthermore, the response to the scandal, including the dismissal of officials and the Interior Minister’s announcement of implementing “systematic safeguards” to prevent abuses of power, demonstrates efforts to create accountable and transparent institutions.
3. Target 16.7: Ensure responsive, inclusive, participatory and representative decision-making at all levels.
   • The article mentions that a law revoking the independence of NABU and SAPO “sparked large-scale protests and international backlash,” which led to the parliament passing a new law to restore their independence. This sequence of events shows a responsive decision-making process influenced by public and international pressure.
4. Target 16.10: Ensure public access to information and protect fundamental freedoms, in accordance with national legislation and international agreements.
   • The anti-corruption agencies publicly “announced” the exposure of the scheme. The Prime Minister, the head of the Servant of the People faction, and President Zelensky all made public statements in response. The article itself, published by a media outlet and citing other sources like Ukrainska Pravda, is a product of this public access to information.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Indicators for SDG 16 Targets

• For Target 16.5 (Reduce corruption):
  • An implied indicator is the number of persons brought to justice for corruption. The article states, “four people have been detained in connection with the bribery scheme.”
  • The article provides a specific example of the prevalence of bribery, which can be measured. It describes a scheme where officials “received a kickback worth 30% of the contract.”
• For Target 16.6 (Effective, accountable institutions):
  • A direct indicator is the existence of independent anti-corruption institutions. The article focuses on the law passed to restore “the independence of the two agencies — the country’s principal anti-corruption bodies.”
  • Actions taken to ensure accountability serve as an indicator. The article mentions the dismissal of an MP from his political faction, a proposed dismissal of a district head, and the launch of an “internal investigation” within the National Guard.
• For Target 16.7 (Responsive decision-making):
  • An implied indicator is the government’s reaction to public dissent. The passing of the law to restore the agencies’ independence is presented as a direct response to “large-scale protests and international backlash.”
• For Target 16.10 (Public access to information):
  • An indicator is the public dissemination of information by government bodies. The article is based on announcements made by NABU, SAPO, and various government officials on platforms like Telegram.
  • The active role of the media in investigating and reporting on the issue, as shown by Ukrainska Pravda identifying the officials involved, serves as an indicator of public access to information and freedom of the press.

4. Table of SDGs, Targets, and Indicators

Source: kyivindependent.com