Ukraine’s energy corruption crisis: Why Zelensky faces his toughest political test

Ukraine energy scandal shakes leadership

As Ukraine approaches the fourth winter of Russia’s invasion, the country is facing a fresh political crisis that has shaken its war-battered energy sector. In a matter of days, the scandal has prompted the resignation of two ministers and forced President Volodymyr Zelensky to sanction a close ally, underlining the challenges of governing amid war.

Operation Midas: Uncovering a high-level graft scheme

The scandal erupted on Monday when the Ukrainian Anti-Corruption Bureau (Nabu) conducted around 70 raids targeting a “high-level criminal organisation” accused of embezzling $100 million from the energy sector. The probe, codenamed Operation Midas—a reference to the mythical king who turned everything he touched to gold—resulted in multiple arrests, including a former advisor to the energy minister and an official from the state nuclear operator, Energoatom.

Nabu released a series of videos featuring wiretapped conversations of those involved, alleging that contractors working with Energoatom were routinely forced to pay 10 to 15 per cent kickbacks on contracts to avoid delayed payments or losing supplier status. The agency described the scheme as a parallel power structure inside the state enterprise overseeing Ukraine’s nuclear plants, which provide roughly half of the country’s energy. Much of the illicit money, it said, was laundered through numerous shell companies, many located abroad.

Zelensky under pressure

The scandal took a dramatic turn when Nabu implicated Timur Mindich, a close friend and former business partner of Zelensky. Mindich co-owns Kvartal 95, the production company founded by Zelensky during his comedian career before entering politics. According to Nabu, Mindich orchestrated the laundering of embezzled funds and influenced senior government officials, including former Defence Minister Rustem Umerov. Mindich reportedly left the country shortly before the investigation became public.

A source close to Zelensky told AFP that the president was “furious and appalled” by the allegations and fully supported the probe. Under mounting pressure, Zelensky called for transparency, demanding the resignation of Justice Minister German Galushchenko and Energy Minister Svitlana Grynchuk, both of whom stepped down promptly. Galushchenko, who previously served as energy minister, is alleged to have received personal benefits from the scheme. Grynchuk, his former deputy, is not directly implicated but is regarded as closely associated with him. Former Deputy Prime Minister Oleksiy Chernyshov is also under investigation.

International and domestic implications

The European Union has yet to issue a robust response, although German Chancellor Friedrich Merz urged Zelensky to take “energetic steps” to tackle corruption. Tackling graft remains a key requirement for Ukraine’s EU membership aspirations.

Ukraine has long struggled with endemic corruption. Since independence, the country has been repeatedly rocked by scandals, including the resignation of Defence Minister Oleksiy Reznikov in 2023 over overpriced army supplies and arrests of defence officials for supplying faulty shells. Corruption is also entrenched in military recruitment, forcing Zelensky to dismiss all regional draft office heads in 2023.

Despite the wartime context, relations between Zelensky’s presidency and anti-corruption agencies remain tense. This summer, Zelensky attempted to curb the independence of Nabu and the Anti-Corruption Prosecutor’s Office (Sapo), but public protests and EU pressure forced him to reverse course.

Ukraine’s corruption landscape

Ukraine currently ranks 105th out of 180 countries in Transparency International’s 2024 Corruption Index, a notable improvement from 142nd a decade ago, but the scandal highlights the persistent challenges the country faces in eradicating graft while managing a warfront. As winter approaches, ensuring integrity in the energy sector will be critical not only for domestic governance but also for sustaining public trust and international support.