As Australia backed Ukraine into a catastrophic land war with Russia, serious questions about corruption, arms diversion and governance were visible in plain sight. In part 2 of his two-part series, Michael McKinley examines what was known, what was ignored, and why it mattered.

When all the Cabinet Papers referring to Ukraine in the post-Cold War period through to the present time are examined, they will provoke puzzling questions as to why and how the policy of support for Ukraine and its counterpart, the demonisation of Russia, was reached. The logic train is not straightforward; indeed, it is not clear that logic played a part in much of it. Or ethics for that matter.

What should be asked is this: how did Australia come to the decision to support the Western Alliance in its encouragement of Ukraine to engage in a land war with Russia – a strategically superior power – when it was clear that:

• the US had long wanted the war for its own purposes;
• NATO would not commit its forces to the conflict;
• the costs and consequences for Ukraine would be catastrophic; and
• Ukraine’s losses, ultimately, would be regarded as unfortunate collateral damage.

To make sense of this claim it is necessary to consider Ukraine’s political-economic development following its separation from the Soviet Union and declaration of independence in late 1991 because it created an economic opportunity for windfall profits: while the one million troops of the Red Army withdrew, they left behind a massive inventory of weapons.

These were superfluous to Ukraine’s needs but found ready buyers, some legal, but many in the illegal arms black market. So began Ukraine’s rise as a reliable supplier to regimes such as the Taliban in Afghanistan, and Saddam Hussein’s Iraq. Within less than a decade the export trade grew tenfold – to $USD1.5 billion.

The scale of the operation, almost immediately following independence, was breathtaking: according to a Ukrainian parliamentary inquiry, in the years 1992-1998, $USD32 billion in military assets went missing, and then subsequently being found in Sierra Leone and Croatia.

As the trade grew, so did the international criminal networks that facilitated it. And as it became a high profit / high growth sector of the national economy, the Ukrainian government demonstrated little interest in countering it; indeed, anyone investigating it was inviting retribution.

To say the least, Ukraine was on its way to becoming what it was well before Russia launched its Special Military Operation (SMO) / Invasion of Ukraine in February 2022: as Transparency International annually reported it was, and remains, along with Russia (which scores worse) one of the most corrupt countries in Europe.

It was also comprehensive – the most corrupt areas identified being the national parliament (Verkhovna Rada), judiciary, police, higher education (encompassing matriculation and graduation); social security; the nuclear energy sector, and the healthcare system.

The charges against these and other sectors remained constant: bribery (to obtain public services); election fraud; “inexplicable enrichment;” and the suborning of the national anti-corruption agencies.

In September 2021 it was the conclusion of the European Court of Auditors  that: “Grand corruption and state capture are still widespread in Ukraine” despite EU action over 20 years, and the promises to eradicate it by the President, Volodymyr Zelensky (who had been in power for the previous two and a half years). In monetary terms the finding of the ECA was that “tens of billions of Euros” were being lost annually as a result of corruption.

Since the onset of Russia’s SMO / invasion the abuse of entrusted power for private gain has been supercharged. For the United States, alive to the rampant corruption which attended its presence in Afghanistan – fuel being delivered at $USD400 per gallon for example – warnings and recent, bitter and costly experience were to hand.

But to no avail. The ecology of aid and assistance in the US itself was not encouraging. In 2024, the US Congress’ Government Accountability Office (GAO) estimated the loss to the government due to fraud at “somewhere between $233 billion and $521 billion per year.”

Thus, in the first year of US assistance, when Ukraine was deluged with weapons, other equipment and aid to the value of over $USD100 Billion, the (GAO) duly reported that it was all undertaken with “inadequate oversight.”  This was a euphemism which could not survive and doesn’t: according to the most recent postings, the Pentagon’s own Criminal Investigation Service is investigating whistleblower allegations detailing the diversion of $USD48 Billion.

In the four years of the war, and under Investigative pressure from Ukraine’s National Anti-corruption Bureau and the Specialised Anti-corruption Prosecutor’s Office, those who exiled themselves, or removed themselves from office include: the Minister of Defence; the Minister of Energy; the Minister of Justice; the Deputy Defence Minister; the Deputy Prime Minister; the Deputy Prosecutor-General; The President’s Chief-of-Staff; the Deputy Head of Zelensky’s presidential office; five governors of front-line provinces;  several senior government officials, and all of the heads of the regional military recruitment centres.

The general charges were, basically, traditional but with a few twists for artistic endeavour in unprecedented circumstances: embezzlement; illicit self-dealing and enrichment; illegally obtained funds; money-laundering; graft; financial mismanagement, and the illegal transportation of military-liable persons across the border.

By way of illustrative examples, two payments of $USD40 million, ostensibly for mortar rounds and artillery shells respectively were diverted to foreign accounts (some in the Balkans) in a scheme of outright theft.

As well, there is evidence that Javelin anti-tank launchers and missiles, supplied by the US in large quantities, have been acquired by the cartels and gangs operating in Mexico. On the black market the launcher sells for between $USD20,000 - $USD60,000; the missile for $USD30,000.

Oil is another particularly attractive commodity. In early 2023, Ukraine’s security service, the SBU, reported embezzlement exceeding $USD1 billion at Ukraine’s biggest oil company, Ukrnafta, and its biggest refiner, Ukrtatnafta.

As for Zelensky himself, there are grounds him being, as they say, “a person of interest.” While he came to power promising to take strong and effective action against corruption, his record is ambiguous.

As noted, the EU before the war, and the US since it began, have both stated their frustrations with the lack of progress.

In those times he and his inner circle were known to have a network of offshore holdings. When he entered politics, he made a point of appearing to separate from his business interests in various ways but subsequent investigations revealed circuitous and complicated arrangements whereby the dividends from these operations were actually paid to his wife.

Here, Zelensky’s ties to many of the disgraced high-ranking officials is an issue in itself: they question whether their corrupt dealings could possibly have been undertaken without him being aware, or at least suspicious, especially when one of the perpetrators, his Chief of Staff, was also his closest confidant and lead negotiator with the US and Russia. Others were friends and business associates of longstanding, relations with whom predated his move from show business into politics.

And if, contrary to logic and the sociology of close personal relations, he knew nothing, there are reports that the US made him aware of them in 2023 and demanded he act. According to reports, the most prominent by Seymour Hersh in 2023, the US demand was based on evidence that 35 generals and senior officials were engaged in highly corrupt scheme centred on the purchase of fuel.

Moreover, in presenting the demand William Burns, the Director of the Central Intelligence Agency let it be known that Washington was aware that Zelensky was part of a small group which had creamed off $USD400 million from the purchase of diesel originally sourced from Russia.

Burns’s demands were minimally met, if that. And in the light of Zelensky’s attempts to reduce the independence of the NABU and related agencies, there is a justifiable lack of confidence in the probity of crucial sectors in Ukraine’s governing elite.

On the evidence to date, this class profited well pre-SMO and has enriched itself spectacularly over the last four years. If and when peace comes to Ukraine they will be presented with a true bonanza. According to a recent Report by the RAND Corporation, Ukraine will become the site of the largest reconstruction project since World War II. The World Economic Forum recently  estimated that the cost will reach $USD1 trillion.

In addition, RAND noted that the country has already become a global model for certain defence technologies and is currently turning  its attention to restructuring the banking system and passing enabling legislation for public-private partnerships. In RAND’s assessment what is on offer is “the business opportunity of the decade.”

For some it definitely will be. They will go about their post-SMO business opportunities in a country whose human and physical devastation they share some responsibility for; indeed, they are rightly described as one of Ukraine’s internal enemies in the current war.

Katrina Vanden Heuvel and James Carden outline the estimated damage to date:

• casualties estimated – emphasis on ‘estimated’ –  at a combined 500,000 dead and wounded;

• the population’s precipitous decline from 45.5 million in 2013 to an estimated 37 million today;

• approximately 20 per cent of the country’s farmland wrecked

• and another 50 per cent made dangerous with landmines and unexploded ordnance.

In investment terms these are the operating costs of a regime and its corruption that was, in real time, and almost real time, easy to discover with diligent research. Was it done, and therefore known in Canberra? If not, why not? Maybe it was, like the war-scheming detailed in Part 1, too hard to address and too easy to follow.

Read Part 1 of this two-part article:

https://johnmenadue.com/post/2026/03/the-ukraine-russia-war-australias-unanswered-questions-part-1/