(Bloomberg Businessweek) -- Located about 15 miles north of Kiev, on the banks of the Dnieper River, the sprawling estate of Mezhyhirya has a storied history in Ukraine. Dating to the 14th century, it’s been an Eastern Orthodox monastery, the summer home of the Communist Party of the Soviet Union, and the residence of a high-ranking Nazi official during World War II. Through a complicated chain of transactions and rental agreements, the property was acquired in 2007 by the family of then-Prime Minister Viktor Yanukovych. After winning Ukraine’s 2010 presidential election, Yanukovych began building a luxurious mansion at Mezhyhirya. Known as the Honka for the Finnish company that built it, the house looks like a Russian gingerbread cottage on steroids.
Back then, Petro Oliynik was running a humble grocery in the western Ukraine city of Lviv. Today he and his girlfriend are the sole inhabitants of the deposed president’s mansion. On the final day of the Maidan revolution in February 2014, with Yanukovych having fled to Russia, Oliynik found himself part of a crowd of revolutionaries who moved into the Honka. He says he felt obliged to protect it, so he appointed himself the keeper of the house and no one seemed to object.
Living in quarters originally intended for kitchen staff, the couple work as self-appointed guards and guides. The estate has become one of Ukraine’s top tourist attractions, with hundreds of visitors a day. Ticket proceeds go to a public organization formed by Oliynik and his group of squatters, who still control the house in a tentative arrangement sanctioned by the state. They say the money is barely enough to cover upkeep.
More than four years after moving in, Oliynik is still waiting for the government to finish nationalizing the property. After a lengthy bureaucratic slog, the process is finally nearing completion. First, the government had to investigate Yanukovych’s assets. Serhiy Horbatyuk, a senior prosecutor who supervised the probe until 2016, says that it concluded that Yanukovych illegally transferred part of Mezhyhirya from the state to a company linked to his family. The property still formally belongs to the old owners. The lack of relevant legislation, such as in absentia trial procedure, and prolonged litigation have contributed to the delay, says Horbatyuk.
The episode is also indicative of how slowly reforms have been moving in Ukraine after the revolution. Russia’s annexation of Crimea and the continued fighting in eastern Ukraine have played a big role in the slowdown, but much of it is of Ukraine’s own making, which is why its citizens and its Western financial backers are showing signs of impatience. “Wars very often stimulate reforms, but that’s not our case,” says Mikhail Minakov, principal investigator on Ukraine at the Kennan Institute, a division of the Washington, D.C.-based Woodrow Wilson International Center for Scholars. “There was a revolutionary attempt, but not much of a revolutionary outcome,” he says.
Minakov fears that the window of opportunity for significant reform after the revolution was open for less than two years and has now essentially closed. Temporarily disoriented during that period, oligarchic clans, old and new, have recaptured the state and are successfully thwarting the implementation of reforms, he says.
Although Ukraine has improved its ranking on Transparency International’s Corruption Perception Index since 2013, it still shares 130th place (out of 180 countries) with Sierra Leone and Myanmar. Many other former Soviet republics, including the authoritarian Belarus, are far ahead, while Russia is just one point behind.
One of the biggest reform efforts was the creation in 2015 of the National Anti-Corruption Bureau—an investigative body targeting officials suspected of corruption. It has launched several high-profile criminal cases but encountered resistance from other law enforcement bodies, particularly the prosecutor general’s office and Ukraine’s powerful interior minister, Arsen Avakov. The bureau has accused anticorruption prosecutor Nazar Kholodnitsky of tampering with investigations, including one involving Avakov’s son. On July 26, Ukraine’s chapter of Transparency International called on Kholodnitsky to resign.
The U.S. Embassy weighed in with a tweet that doesn’t mention Kholodnitsky by name but states that prosecutors who engage in witness tampering and obstruct justice must resign.
It’s also taken years to establish an anticorruption court. Ukraine’s parliament finally adopted legislation creating the court on June 7, but last-minute amendments sought to keep appeals from existing cases out of its jurisdiction. The International Monetary Fund demanded the loophole be removed, which it was the following month. That will help unfreeze Ukraine’s $17.5 billion bailout, though the latest $1.9 billion tranche – delayed since last year on reform delays – still hasn’t been approved and is awaiting agreement on household gas prices and the state budget.
An IMF report from 2017 describes corruption in Ukraine as “exceptionally high” and says it’s a major reason why the economy of neighboring Poland is now three times bigger than Ukraine’s. The two countries had roughly the same gross domestic product in 1992. The report describes in detail the nature of corruption in Ukraine and how power remains concentrated among a handful of oligarchic elites: “The ‘state capture’ by blocks of powerful political and economic elites that are pyramidal in structure and entrenched throughout public institutions and the economy has been seen as a specific feature of Ukraine’s corruption.”
Ukraine’s economy also lags behind its nemesis, Russia, where GDP per capita is roughly four times higher and the average wage is more than double. That ultimately undercuts Ukraine’s ability to resist Russian aggression and to serve as a role model for other countries in the region seeking closer ties with the West.
Asked if Ukraine is still producing the likes of former President Yanukovych, prosecutor Horbatyuk says it is. “Because law enforcement bodies work in the same way as before,” he says. “They are headed by appointees of the country’s leadership and work in the interests of political forces and oligarchs who gave them their jobs.” Horbatyuk is currently in open rebellion against his boss, Prosecutor General Yuriy Lutsenko, whom he holds responsible for mishandling criminal cases related to the revolution.
It doesn’t help that Ukraine has been sucked into the wave of nationalism sweeping across much of Eastern Europe. “Ultra-right structures are growing into security bodies,” says Minakov of the Keenan Institute. “This will have a long-term uncontrollable effect,” he says.
At Mezhyhirya, Oliynik, a stocky man with a slightly mischievous smile, appears before tour groups draped in the red-and-black flag of Ukrainian nationalists. This was his uniform during the four-month revolution, which culminated in a bloody standoff between riot police and revolutionaries that claimed about 130 lives.
Four years later, the mansion remains in perfect shape—sparkling clean, with furniture and fixtures intact and caged canary birds singing in chorus. The decor speaks volumes about the former inhabitants—one room is decorated with knights’ armor, another has a stuffed crocodile lying on an oak dining table. The altar of an in-house chapel is filled with precious icons, while the main hall features a piano signed by John Lennon.
Frederick Altice, a professor at Yale School of Medicine, was along for a tour of the estate with a group of friends one day in late June. He said he felt disturbed by the vulgar opulence of Mezhyhirya—especially given the levels of poverty and destitution he’s seen while working on projects to tackle Ukraine’s acute HIV problem. “It is disheartening and almost nauseating, because I recognize how many people didn’t have things in order for this man to have this kind of setting,” Altice says.
Oliynik says that before the revolution his business in Lviv was constantly targeted by various small-scale officials hunting for bribes. Things are marginally better now: “At least we can achieve something through protest, and police won’t break into the shop smashing everything like they do in Russia.” But his view of Ukraine’s post-Maidan leadership is extremely negative; he sees next to no difference between them and the leaders deposed by the revolution.
“Oh, Maidan—we believed in it so much!” a Ukrainian woman exclaimed scornfully during one of Oliynik’s recent tours. “You are frustrated, because you’ve stopped moving forward,” he replied to her. “But you should keep struggling.”
To contact the author of this story: Leonid Ragozin in Washington at leonid.ragozin@gmail.com
To contact the editor responsible for this story: Matthew Philips at mphilips3@bloomberg.net
©2018 Bloomberg L.P.
