The US is increasingly urging Ukraine to do more to combat governmental corruption, issuing several notices to Kyiv in the last few weeks indicating that certain kinds of US economic aid will be linked to Ukraine's progress in reforming its institutions, multiple US officials told CNN.
The Biden administration's commitment to supporting Ukraine's military remains undiminished. But officials have made clear recently that other forms of US aid are potentially in jeopardy if Ukraine does not do more to address corruption.
Congress has not yet approved the administration's request for $24 billion in additional funding for Ukraine, with some Republicans wary of providing so much money without robust oversight and conditions attached.
"The message to the Ukrainians has always been that if any of these funds are misappropriated, then it jeopardizes all US aid to the country," one US official familiar with the efforts told CNN.
The State Department issued a formal diplomatic note, also known as a demarche, to Ukraine in late summer that said the US expects Ukraine to continue pursuing various anti-corruption and financial transparency efforts in order to keep receiving direct budget support, three officials familiar with the matter told CNN. The demarche has not been previously reported.
The US has provided Ukraine with over $23 billion in direct budget support since the war began, according to the Congressional Research Service. This money is separate from military aid and allows Ukraine to continue providing essential services to its citizens like emergency first responders, health care, and education. It is disbursed by the United States Agency for International Development (USAID) through the World Bank to the Ukrainian Ministry of Finance.
The demarche also emphasized the need for Ukraine to implement critical reforms under Ukraine's International Monetary Fund program, including those related to anti-money laundering/countering the financing of terrorism (AML/CFT), a source familiar with the matter said.
In a statement to CNN, the Ukrainian embassy in Washington said that Ukraine has moved "ambitiously" to pass reforms, including on its IMF program.
"We have conducted these reforms initiated by Ukraine with the help and support from the US, EU and other friends," the statement says. "And their practical support to our Cabinet of ministers as well as our (National Bank of Ukraine), General Prosecutors office and anticorruption agencies is appreciated and valued...In all our obligations with IMF, EU and other international donors as well as USA, Ukraine delivers on this front."
The administration has been public about its desire to help Ukraine fight corruption throughout its war with Russia. But private diplomatic discussions about the issue have ramped up in recent weeks, as questions have swirled about whether Congress will approve the administration's funding request for Ukraine.
National Security adviser Jake Sullivan met with a delegation of Ukrainian anti-corruption officials to discuss their efforts just last month, and Secretary of State Antony Blinken discussed the issue with Ukrainian President Volodymyr Zelensky while in Kyiv in early September, State Department spokesperson Matthew Miller said on Monday.
Asked by CNN about the US push to get Ukraine to tackle corruption, Miller said that he would not detail "specific conversations, other than to say that it continues to be a high priority for us that we raise with our Ukrainian counterparts, and it continues to be a priority for Ukraine. And we have seen them take action in response to specific requests that we have made as recently as the past few weeks."
White House has drafted a list of reforms
Separately, the White House has drafted a list of reforms Ukraine should implement in order to continue receiving US financial assistance and move toward integrating into Europe.
The draft, first reported by Ukrainska Pravda, was shared with the US embassy in Kyiv and members of the Donor Coordination Platform, a mechanism launched in January to better coordinate international financial support flowing into Ukraine. The reforms are not a condition for receiving military aid, a US official said.
"This list was provided as a basis for consultation with the Government of Ukraine and key partners as part of our enduring support to Ukraine and its efforts to integrate into Europe, a goal the United States strongly supports," the US embassy in Kyiv said in a statement.
The White House document outlines changes Ukraine could make within three months, six months, one year and 18 months.
Many of the proposals -- including strengthening the Specialized Anti-Corruption Prosecutor's Office, enhancing the independence of the supervisory boards of Ukrainian state-owned companies, and constitutional court reform -- are also requirements for EU membership and benchmarks for the IMF.
"Reforms in the energy sector, a bastion of corruption and oligarchic control, are essential to cementing Ukraine's European integration," the State Department said in a strategy memo for Ukraine posted on its website in August.
The memo added that "Ukraine must maintain stable financial management of its economy in order to continue to fight the war, rebuilt the economy, and achieve its goal to become a prosperous, democratic, western country. Ukraine must slay the corruption dragon once and for all."
The Ukrainian embassy said in its statement to CNN that Ukrainian officials signed an "energy memorandum" during their visit to Washington last month, and that Ukraine has passed a European-style law aimed at preventing abuses in wholesale energy markets. The White House document says implementation of that law should occur by April 2024.
Zelensky, for his part, has been eager to show the US, EU and NATO that he is cracking down on corruption, particularly after Russia's invasion of Ukraine. He recently cleaned house at the Ukrainian Ministry of Defense, firing his defense minister and several senior defense officials, and launched a number of high-profile raids earlier this year against officials suspected of graft.
'Account for every single penny'
Ukraine considers the direct budget support it gets from the US and other foreign allies to be vital to keeping its economy afloat.
"We are grateful that this money arrives as grants, because this does not affect the state debt of Ukraine, and this is a very important factor in these difficult times," Ukrainian Prime Minister Denys Shmyhal told Blinken last month, referring to the US' direct budget support for Ukraine.
That money is also the "most closely scrutinized" form of aid to Ukraine, a senior Democratic Senate aide told CNN. "The Ukrainians know they have to account for every single penny. The Ukrainians making the decisions know that accountability is a key to their continuing to get funds. It's been a consistent point of messaging from the administration. Which is fair considering all the support we're giving them."
USAID's inspector general and Ukraine's Specialized Anti-Corruption Prosecutor signed a memorandum of understanding in July aimed at strengthening USAID's ability to probe any misuse or abuse of funds by Ukraine, including the direct budget support.
The US intends to provide up to $3.3 billion in direct economic aid to Ukraine if Congress authorizes its $24 billion supplemental request for Ukraine.
That supplemental request is now in limbo, however.
Congress passed a short-term bill on Saturday to continue funding the government through mid-November, but the legislation does not include additional money for Ukraine. Republicans have increasingly questioned the wisdom of the funding and called for greater oversight of it, though some remain opposed to supporting Ukraine as a matter of principle, regardless of Kyiv's anti-corruption efforts.
The Pentagon, meanwhile, is also taking new steps to better monitor US military aid flowing to Ukraine. The Defense Department inspector general announced last month that it will be establishing a new team in Ukraine to monitor ongoing US security assistance to Kyiv, which has totaled more than $43.7 billion since the start of the Biden administration.
It will mark the first time the DoD IG will have personnel based in Ukraine since Russia's invasion in February 2022, said spokeswoman Megan Reed.
The White House noted in its draft list of priorities for Ukraine that the Ukrainian MoD should "redesign" its armament and procurement processes to better reflect NATO standards of "transparency, accountability, efficiency and competition in defense procurement."
Another issue that has come up in recent weeks is the question of whether Zelensky will move to hold a presidential election in March 2024. Sen. Lindsey Graham has pushed for an election, saying it will demonstrate Ukraine's commitment to freedom and democracy in the face of Russia's invasion.
Zelensky has said that holding an election in wartime would be complicated and expensive, noting that international observers must be allowed in to ensure the results are internationally recognized. But he said last month that he is ready to do so "if it is necessary."