Ukraine’s system of crony capitalism

Think tank: Chatham House

Author(s): John Lough

July 1, 2021

This report from UK think tank Chatham House looks at the challenge of dismantling ‘systema’.

Ukraine’s system of crony capitalism – described in this paper as systema – reflects the absence of a strong state, and an enduring relationship between big business and the country’s political class that puts their own interests before those of society. Despite some setbacks since 2014, crony capitalism’s stakeholders have shown their ability to continue to manipulate Ukraine’s public institutions in the face of the deepest set of reforms undertaken since independence, as well as in conditions of war. Dismantling the networks of systema will require a combination of deep structural reforms, preventive and repressive measures to curb corruption, and civic activism to hold politicians, officials and business owners accountable. This research paper sets out how systema operates across key sectors of Ukraine’s economy, and identifies the main mechanisms that enable its stakeholders to preserve their privileges and divert public resources. It also considers the factors that may change the behaviour of those who benefit from crony capitalism.