Party Time: The Gap Between Stated Incomes and Real Cash Flows in Ukrainian Politics

Ukrainian politics is a dirty and expensive game. Political parties spend colossal budgets to meet the main goals of their sponsors: being elected, getting positions in the cabinet, taking control over ‘income streams’.

As the black ledger of the Party of Regions proves, parties’ expenses on offices and salaries is a drop in the bucket. The real money is spent on buying MPs and government officials, ‘hiring’ judges, members of the Central Election Committee, ‘sociologists’ and media experts, ordering TV and outdoor advertisements, as well as dozens of other expenses.

The stated budgets of the major political parties exceed several million hryvnias, but they usually underestimate by tenfold or more. After the Second Maidan the new government managed, with a decent amount of pushing by the public, to perform several practical steps to minimize the influence of oligarchs on Ukrainian political parties.

First among those was a decision to adopt a law on financing of political parties, which stipulates state financing of the political actors that managed to get to the Rada. The second step was creation of the National Agency on Corruption Prevention (NAZK), which among other things will control the transparency of the financing of all the political parties.

Recently Ukrainians got their first chance from the times of the country’s independence to look inside the ‘bank vault’ and see the financial reports of the major Ukrainian parties.

Yet these reports caused anger and surprise, not satisfaction. As was expected: no oligarchs or their affiliated structures were mentioned among the sponsors of Ukrainian politics.

The parties themselves are poster kids of modesty and poor man’s dignity according to their financial reports. So in order to discover the truth Ukrayinska Pravda decided to analyze the balance sheets of the Ukrainian parliamentary parties.

Uneasy Questions from the NAZK

In early August 2016, during the peak of the ‘vacation season’ Ukrainian parties invented a new way to demonstrate their openness and transparency. Almost all parliamentary parties published financial reports for the first quarter of 2016 on their websites.

The parties had to submit the report to the NAZK, but they decided to use it for a public relations stunt. In general, the form which NAZK requires to be submitted by the political parties, is quite long and detailed. Parties have to disclose all the data on the money they received and spent, the real estate they own and use, show their notorious car pools and the amounts of donations including the names of the donors.

Even when completed in the most formal and brief manner such a report will take up to 50 pages. Yet those who expected the report to show the luxury automobiles or the last names of Akhmetov, Firtash and Kolomoyskyi, were disappointed.

In their financial reports the leading Ukrainian political parties claim living in modesty and minimalism, having no real estate, some even claim getting no donations.

What Is the Cost of Having a Political Party?

Creating and owning a party is not a poor man’s game. Yet the official submissions claim that a major political party in Ukraine can exist on ₴10 900 ($440) for an entire quarter. At least this is what Narodnyi Front [Eng.: People’s Front], a member of the current governing coalition, indicated as their ‘expenses’. Narodnyi Front allegedly spent ₴10 900 on mobile telephony and these were its only expenses.

The Radical Party of Ukraine led by Oleh Lyashko spent more than ₴100 000 on telecommunications and these are its only expenses that were mentioned in its financial report.

Another irregularity is that Narodnyi Front, Radical Party and Opposition Bloc all have no employees listed in their reports, even volunteers.

The financial report of Poroshenko’s Bloc Solidarnist is also a very modest one. The party spent ₴265 000 in the first quarter of 2016. Of those, ₴20 500 are salaries. It is interesting that only three people are officially employed by the largest political party of Ukraine.

Even more interesting is the fact that services of these people cost Poroshenko seven times less than the services of the President’s speechwriter Oleh Medvedyev. The President’s party paid Medvedyev ₴140 000 for his advice.

Batkivshchyna Party led by Yuliya Tymoshenko is the leader in official spending. It has 64 employees, yet they and their families are living on bread, water and kefir, being paid a monthly wage of ₴634 ($27) to ₴1267 ($51) which is below the country’s current minimum wage. The total which Batkivshchyna spent on salaries in first quarter of 2016 is ₴312 000.

At the same time: no party officially spent a single hryvnia on maintaining their numerous regional offices.

Real and Not So Real Estate

The major expenses of all the parties are renting real estate for their offices. All parties state they own no real estate in Ukraine, the only exclusion being Batkivshchyna which owns an apartment in Mukacheve for reasons we cannot explain. The balance price of this real estate is slightly less than ₴4 000 ($155), so it should not have a decisive influence on the financial position of Tymoshenko’s party.

For the practical needs the party uses its well-known office located at Turivska Street in Kyiv. Batkivshchyna rents two large premises here and a garage, which all together costed ₴1.4 million ($54 000) in the first quarter of 2016.

Batkivshchyna is the only political party to officially own its cars. Their financial report includes 25 various vehicles priced at almost ₴1 million in total. There are no luxury cars in this list.

Actually only one luxury car was reported by Ukrainian politicians. The Radical Party rented a Cadillac Escalade for the duration of three years. The market price for such a vehicle is three and more million hryvnias, yet Oleskandr Hulyak. a devoted supporter of the radicals from the town of Makariv in Kyivska Oblast, leased the vehicle for only ₴3 800 ($146) per month.

The Radical Party is not wasting money on its office as well. Oleh Lyashko located his party in the premises he owns at Klovskyi Uzviz in Kyiv. The real estate is priced at ₴100 000 ($3 856) per quarter.

Poroshenko is spending less. The office of his party at Lavrska Street cost the President’s party ₴90 000 ($3470) per three months. Samopomich spent ₴80 000 ($3085) on their office.

The most costly are the party headquarters of the Opposition Bloc which spent ₴1.8 million ($69 404) on renting their office on Volosska Street in Podil District of Kyiv.

The office cost of Narodnyi Front is ridiculous. Their financial report mentions that the party is registered at Verbytskoho Street in Kyiv. Yet it does not own these or any other premises. The financial report of Narodnyi Front simply does not mention renting or owning any office or automobiles.

Price of the People’s Love

The parsimony of Narodnyi Front seemingly generates results. Yatsenuk’s Party has the most of money on its accounts among the major political parties of Ukraine.

While having no donations as of the end of March 2016, Nardonyi Front had ₴5.4 million ($208 thousand) on its bank accounts — a trifle, given the real amounts of money needed to run Ukrainian politics. Yet other political parties failed to show even such a modest amount on their accounts.

For example, Samopomich had only ₴28 000 as of the end of March 2016, the Opposition Bloc had ₴35 000, Batkivshchyna — slightly less than ₴180 000.

Poroshenko Bloc was feeling more secure, having ₴1.08 million on their accounts, which they deposited to the bank and even earned ₴45 000 of savings premium.

The Radical Party became another member of the millionaire's club, by having almost ₴2 million in the bank. An interesting fact is that the amount of money in the bank is not related to the level of the ‘popular support’, which in this case is measured by the amounts of donations.

Narodnyi Front, the owner of the largest bank account, did not get a single hryvnia of donations. Of ₴2 millions on the accounts of the Radical Party only ₴1528 came from the donations.

Poroshenko Bloc also cannot boast of the people’s support: while it got ₴193 000 of donations, they money mostly came from the regional offices of the Bloc.

The Opposition Bloc also got no individual donations. The ₴1.2 million it received in the first quarter of 2016 were corporate donations of two private firms which are based in Kyiv.

The only parties that were supported exclusively by the individual donations are Samopomich and Batkivshchyna, who managed to get ₴320 000 and ₴1.7 million of individual donations respectively.

Interesting is the fact that by analysing the financial reports of Batkivshchyna we established the ‘donation days’ — for several days during the month the banking account of Batkivshchyna was replenished by the individual donations from the various parts of Ukraine. The amount of almost every payment was ₴2 000.

The Watchers of the Treasury

Probably the most informative moment of all the financial reports is a question of who is watching ‘the party’s treasures’. While Ukrainian parties now can demonstrate their cash flow to the public, they mostly use insiders to take care of their accounts.

Who can be more trusted person for Poroshenko Bloc than Poroshenko himself? So it is logical that the treasury of the Poroshenko Bloc is deposited with the International Investment Bank, owned by the President and his old time army friend Ihor Kononenko, who also happens to be the Deputy Head of the Poroshenko Bloc faction in the Rada.

As we all know: the Opposition Bloc has two major centers of influence: the group of Rinat Akhmetov and the group of Serhiy Lyovochkin. This fact demonstrates itself in the way the party’s accounts are structured: one account is opened with Akhmetov’s First Ukrainian International Bank (a.k.a. PUMB), another is opened with the Misto Bank owned by Ivan Fursin, an MP and an old time business partner of Lyovochkin and Firtash.

Narodnyi Front also entrusted their bank account to an insider. Their party account is with Diamantbank, owned by the ex-MP David Zhvaniya, who is an old-time business partner of Mykola Martynenko — one of the unofficial sponsors of the party. It is worth mentioning that Diamantbank is investigated in both cases against Martynenko, which are currently opened by NABU.

Tymoshenko’s Party also guides itself by the realities of the modern Ukrainian politics. While Batkivshchyna has an account with Ukrgasbank and used to have an account with now-defunct Fidobank of Oleksandr Adarich, the total funds available on these accounts as of the end of March 2016 was ₴300 ($8). Veles Bank, owned by the MP from Cherkassy and a member of Batkivshchyna Oleksandr Synhaevskyi, is the bank hosting the real account of Batkivshchyna.

The youngest players of the Ukrainian politics: Samopomich and the Radical Party, which got to the Rada only after EuroMaidan, prefer the large international banks with European capital. The Radical Party has an account with RaiffeisenBank Aval, and Samopomich uses UkrSibBank, a member of BNP Paribas Group.

Dozens of millions of dollars are mentioned in private conversations covering Ukrainian politics. The recently published black ledger of the Party of Regions uncovered that the party and its technical satellites might cost billions of dollars to maintain.

Besides that, the black ledger of the Party of Regions demonstrated another important problem. Namely: the official and true spending of the Ukrainian political parties are uncomparable. Most of the real financial transaction is conducted using petty cash, without tax reporting and off the financial records. We should keep this in mind when looking at the recently published financial reports of the major Ukrainian political parties.

Roman Romaniuk, Ukrayinska Pravda