Ukraine needs $1 trillion to rebuild. The country's oligarchs plan to loot it.

Among the recipients of Pyle's letter was the Office of the President of Ukraine — a team of some five dozen insiders headed by Andriy Yermak, a longtime friend of President Volodymyr Zelensky. In political and business circles in Kyiv, Yermak, a former lawyer and film producer, is widely viewed as the second most powerful person in the country — a sort of masterminding Dick Cheney to Zelensky's George W. Bush. Some, in fact, see Yermak as more influential than the president, a former comedian who entered office in 2019 without any previous experience in government. When the two men stand next to each other in their matching olive military garb, the bulky, 6-foot-plus Yermak towers over the wiry, 5-foot-7 Zelensky. It often looks, the Kyiv financier Andriy Sirko told me, as though Yermak is "babysitting Zelensky."

As it happened, on the day Pyle's letter was dispatched, I was in Kyiv, meeting with Daria Kaleniuk, the executive director of the Anti-Corruption Action Center, an advocacy organization that receives funding from Washington and member states of the European Union. Over the course of an hour, Kaleniuk painted for me an unvarnished picture of the Ukrainian political-economic power structure in the Zelensky-Yermak era. The "good story," she told me, is that Russia's full-scale invasion of Ukraine in 2022 has largely destroyed the generation of oligarchs who had enjoyed free rein to plunder Ukraine's economy since the country freed itself from the Soviet Union in 1991. The old titans no longer possess the power they once exerted over parliament and the media, and many of their industrial assets lay beyond their reach in territory now occupied by the Russian military.

But the "bad story," Kaleniuk continued, is that Yermak — whom she called "intoxicated by power" — is creating a new system of oligarchy over which he presides. By her account, Yermak, through his deputies in the Office of the President and cabinet ministers at his beck and call, is maneuvering to exert control over a large swath of Ukraine's economy, as well as its law enforcement and security apparatus. Through these machinations, she said, "well-connected people" in business are getting government contracts at inflated prices. "He is not building a strong Ukraine," Kaleniuk said. "He is damaging the war effort." What she was describing, in effect, is the formation of an accidental oligarchy, under the cover of martial law invoked by the Zelensky government.

Similar anxieties about Yermak are widely shared in Kyiv. "Yermak is a daddy teaching these kids how to manage the business," Yuriy Alatortsev, the CEO of a fertilizer company, told me — the "business," he explained, being political corruption. Yermak and Zelensky control the country's ruling party, Servant of the People, which commands a majority in Ukraine's unicameral parliament. "Please rest assured," Alatortsev texted me, "with mono majority in the parliament you can open a coin factory of your own."

Yermak denies that he's using Zelensky's office to plunder Ukraine. Daria Zarivna, an advisor to Yermak, told me such criticism reflected "an information war against the leadership of Ukraine" waged by Russia — an assertion Yermak himself made on a visit to Washington in December. She also said "Ukrainian oligarchs" pitted against the Zelensky team were using the Ukrainian "media market" to combat anti-corruption reforms.

But the graft that has long contaminated the country's political system unsettles Ukrainians far from the circles of power. "Huge corruption" is Ukraine's biggest problem, an 18-year-old at a Kyiv café told me bluntly. "I love Ukraine," she said — but she hesitates to give money to the military for fear a dishonest official will steal her donation. Earlier this year, investigative journalists revealed that the prices at which suppliers promised to deliver basics like potatoes and cabbage to Ukrainian troops were inflated two to three times beyond the purchase price reported to government tax officials.

In polls taken last summer by the Kyiv-based Democratic Initiatives Foundation, Ukrainians listed corruption as the No. 1 obstacle to the development of entrepreneurship in the country — ahead of destruction caused by the war. And a majority of Ukrainians surveyed said it would be "appropriate" for foreign partners to provide military aid "only under the condition of an effective fight against corruption in Ukraine." On the most recent "corruption perception" index assembled by the watchdog group Transparency International, Ukraine ranked 116 out of 180 countries — not far in front of Russia, which clocked in at 137.

Yet it is Ukraine's Office of the President, Yermak's power base, that the White House is counting on to root out the country's systemic corruption. It's possible that the National Security Council's letter was intended in part to show skeptics of US aid to Ukraine that Biden is taking the corruption problem seriously. Still, with Yermak serving as Zelensky's most important advisor, there is no escaping Yermak: On discussions related to the war, he is the main point of contact in Kyiv for Jake Sullivan, Biden's national security advisor, whom Yermak recently called "my good friend."

The stakes are high. The Ukrainian soldier on the battlefront is not risking his life for the cause of returning control of his nation's government and economy to its most predatory players. That outcome, while a defeat for Russia, would represent a hollow victory for Ukraine, and for Washington. The United States, meanwhile, has already provided some $67 billion to Ukraine's defense, and by one estimate the cost of postwar reconstruction could exceed $1 trillion. What is there to prevent such transformational sums of money — more than five times the prewar gross domestic product of Ukraine — from being siphoned off by the managers of an emerging oligarchy? "It's going to be a shark feeding frenzy," said Roland Spitz, a former investment banker in Kyiv. And the biggest sharks, he added, are apt to be "the people in power."

"The new crowd," he continued, "is always the most hungry."

Taylor, who has been in meetings with both men present, regards Zelensky as "the lead of that pair." As for Yermak, "you have undoubtedly heard stories," Taylor told me with a chuckle. "I have heard some of the same ones."

But is Yermak, I pressed, part of the solution for forging a better Ukraine? Or is he part of the problem?

"I see Zelensky as part of the solution," Taylor replied diplomatically.

Yermak was born in Kyiv in 1971. His mother, Marina, was a native of Leningrad in Soviet Russia, and his father, Boris, was a native of Kyiv who served in the Soviet Embassy in Afghanistan during the war there. Yermak dreamed of becoming a military pilot but wound up studying international law at the Kyiv Institute of International Affairs. During his second year, in 1991, the USSR suddenly collapsed. Some of his classmates went to work for European law firms, but Yermak stayed in the newly independent Ukraine and founded his own law firm, which specialized in intellectual property and corporate registrations. From his work as an attorney, he has said, he learned firsthand how corrupt the courts were in post-Soviet Ukraine. He met the country's future president in about 2010, when his firm was representing the television channel Inter, where Zelensky was general producer. "We have been sincere friends with Volodymyr Oleksandrovych for many years," Yermak told Ukrainska Pravda in 2020.

One ingredient to Yermak's success is his universally admired capacity for punishing hard work, around the clock. He has no spouse or children, and he has literally made his second-floor office quarters his home. He sleeps there, showers there, exercises there, and keeps his wardrobe there. In meals with staff, prepared by military cooks, he does not drink alcohol. Though he is capable of screaming at underlings, even those he has clashed with concede that he knows how to get things done. "He is a very good operational manager," said Oleksiy Arestovych, who worked as an advisor to Yermak for two years, in charge of strategic communications on national defense.

Yet Yermak, Arestovych told me, is also a master of using "black propaganda" to neutralize perceived rivals. In the early days of the war, the telegenic Arestovych became the country's unofficial "therapist in chief," holding daily YouTube briefings assuring Ukrainians his country would soon prevail. By his telling, his ascent was viewed by Yermak as a threat to the popular regard for Zelensky. Reports soon circulated in the Ukrainian media that Arestovych was a Russian agent — the worst sin imaginable, given the national mood. No matter that Arestovych had fought on the front lines against Russia in 2014, after President Vladimir Putin had fomented a separatist insurgency in eastern Ukraine. The damage was done — and Arestovych held Yermak accountable for the smears. Yermak, he told me, is a two-sided person, "evil and good together."

In Arestovych's perspective, a key to understanding his former boss is Yermak's Russianness. Like Zelensky, his first language is Russian. With nationalist passions in Ukraine running high, some Ukrainians refuse to speak the tongue of its invader. Yet Yermak and Zelensky talk to each other in Russian; it was also the language spoken in the Office of the President, Arestovych told me, when he worked there. He says Yermak and his key deputies exhibit a "style of behavior, style of management," that "is completely Russian — all of them think of people as chess pieces." Another former official in the Zelensky administration also described Yermak to me as "a kind of Russian-Soviet type" — meaning someone who prefers a Byzantine, cloaked method of operation, as opposed to a more modern, open style.

In December 2021, Roman Chervinsky, a former officer in Ukraine's chief directorate of intelligence, voiced allegations that Yermak might have spied for Russia by supplying the enemy with details of a Ukrainian plan to entrap Russian mercenaries in Belarus. In April, Chervinsky was arrested on charges of exceeding his authority in an operation to try to get a Russian pilot to defect to Ukraine. Yermak has said allegations he has cooperated with Russia's security service are part of a Russian disinformation campaign and "funny for me to hear." His advisor, Zarivna, told me Chervinsky was involved "with one of the largest oligarchic groups that advances its selfish agenda" in Ukraine. But she named no such group and neither, in a statement on this matter, did Vasyl Maliuk, head of the Security Service of Ukraine, known as the SBU.

At Zarivna's suggestion, I also spoke on Zoom with General Kyrylo Budanov, head of the Main Directorate of Intelligence of the Ministry of Defense of Ukraine. He told me that an exhaustive internal investigation definitively proved that Chervinsky's allegation against Yermak as a Russian spy was false. And then he inquired about my Zoom wallpaper, in particular a portrait of the writer Anton Chekhov and a carved figure of a bear. These were Russian symbols, he said, to which I responded that my wallpaper also contained a Ukrainian symbol, of a painted hollowed out egg.

Please understand, I told him: "I think this war is horrible. I think Putin is a bastard." He responded: "I am really glad you have that specific position supportive of Ukraine. As a journalist, I hope you will do the maximum in your craft not to create another information precedent which will be exploited by the Russians. Russians, they love these interesting stories. They twist them."

Before the war, Yermak came under fire for the air of corruption that seemed to surround him. In 2020, the Kyiv Post — in a scandal it dubbed "Yermakgate" — reported on videos of Yermak's younger brother, Denys, appearing to discuss bribes in return for landing people jobs with the government and state-controlled companies. "Andriy Yermak insists he was not involved," the paper reported, "that his brother was acting independently." But the publication also blasted Yermak for what it called "a tactless display of ostentation." His crime? "He acquired a new Mercedes valued at almost 3 million hrv, or over $100,000." Zarivna noted that Yermak had been "a successful businessman, and he could afford such a car."

But when the full-scale invasion began, Yermakgate quickly receded. The Western press, partial to tales of a heroic Ukraine under siege, tended to avert its eye from the seamy prewar tales involving Zelensky's closest advisor. "When the White House wants to talk to Ukraine," a profile in The Wall Street Journal began in June, "it calls Andriy Yermak." The piece noted that Yermak "earned capital in the West" for helping to evacuate Americans during the US military's frantic withdrawal from Afghanistan in 2021, and cited his reputation as a "film buff" with "a particular love of Italian movies — Fellini rather than Visconti." There was no mention of the scandal involving his brother, or Chervinsky's allegation that he had served as a Russian agent, or his reputation as the leader of a new generation of oligarchs. Instead, the Journal cited Yermak's quest "to overhaul the unwieldy bureaucracy of the presidential office." The man viewed by critics in Kyiv as the face of political corruption was being hailed as a champion of good government.

Before Zelensky's rise to power, the business oligarchy in Ukraine, as in other post-Soviet countries, operated on a spoils system that amounted to might makes right. There was little incentive for an honest entrepreneur to launch a company with the knowledge that, with the company's success, one of the clans might muscle in on the venture and seize control, no matter what legal protections were on the books. As clan leaders became billionaires, through their capture of industrial and financial assets, Ukraine remained desperately poor, its wealth routinely pumped out of the country into offshore accounts. In 2018, the year before Zelensky's election, Ukraine ranked as the poorest country in Europe, with a GDP per capita income of just below $3,000 — 8% lower than that of Moldova, the second poorest.

There is an inherent murkiness to oligarchic structures wherever they arise, as I discovered in the early 2000s, during my time as Moscow bureau chief of Business Week. One day, I received a call from a business magnate who told me his life was at risk over a dispute involving the privatization of a vegetable-oil factory in the Ukrainian seaport of Odesa. Intrigued, I hopped on a flight — but came nowhere close to getting to the bottom of the matter. (I also declined, to the astonishment of my host, the services of a prostitute he had taken it upon himself to hire as a gift.) A decade later, on a second reporting trip to Odesa, I asked my Ukrainian companion for the name of the biggest owner of assets in the sprawling industrial city. The answer, he told me, was Ihor Kolomoisky.

Kolomoisky enjoyed a reputation as one of the most ruthless of the oligarchs in post-Soviet Ukraine. He had amassed substantial holdings in metals, banks, airlines, energy, and media. He was also connected to Zelensky: His 1+1 Media Group included a Ukrainian television channel that broadcast Zelensky's scripted shows and championed his run for the presidency. More than a few insiders in Kyiv's political, business, and media circles regarded Kolomoisky as the real victor of Zelensky's improbable triumph, the modern-day robber baron who would now run Ukraine behind his likable front man.

But that interpretation was probably always wrong. Zelensky's comedy drew on his withering portraits of oligarch types, and he campaigned as the candidate who would rid Ukraine of these despised parasites. Once in office, he seemed to make good on that vow. In 2021, he pushed through a law to require publication of a public register of oligarchs, which would brand them as detriments to the social welfare. After Russia invaded Ukraine, he signed a decree requiring all broadcasts by national television channels — mostly owned by the oligarchs — to be approved by the Office of the President. Given the unpromising turn of events, one prominent oligarch, Rinat Akhmetov, often said to be Ukraine's richest man, sold off all his media holdings, including the country's largest television channel. Then, in September, just two weeks before I arrived in Kyiv, the SBU arrested Kolomoisky on charges of fraud and money laundering.

Washington applauded the move; Kolomoisky had already been blacklisted by the State Department, made ineligible to enter the United States "due to his involvement in significant corruption," as Secretary of State Antony Blinken declared in 2021. But as I learned in Kyiv, opinion was split on the meaning of Kolomoisky's seizure by the SBU. Some insiders thought Zelensky was tossing Washington a bone to prove he was serious about tackling corruption. Others viewed the arrest as a cagy operation by the Yermak clan to take out a rival. One of Yermak's top deputies, Oleh Tatarov, oversees the SBU. Tatarov has himself been accused of corruption: The CEO of one of Ukraine's biggest construction firms told Reuters that Tatarov had bribed public officials with rolls of American cash to get building projects approved. Tatarov has denied doing anything wrong and said political opponents are trying to settle scores. His accuser also faces allegations of corruption involving the construction firm.

Yermak, for his part, has insisted Zelensky has "zero tolerance for corruption." He pointed, as evidence, to the arrest in May of the chief justice of the Ukrainian Supreme Court on bribery charges, in a case brought by federal anti-corruption prosecutors. "The US taxpayers have the right to know what they pay for," Zarivna told me in response to my question about how the Office of the President responded to the September letter sent by the Biden White House on the need for reforms to counter corruption. "We are reporting every cent spent, and open for an independent audit."

The battle over corruption in Ukraine stems, in part, from a deep cultural divide within the country. It is undoubtedly the case, as Yermak says, that the Kremlin's propagandists in Moscow strive to depict Zelensky's government as a den of thieves. Nevertheless, the perspective that Yermak is building an oligarchic clan with the help of dubious deputies like Tatarov tends to come from the most cosmopolitan, Western-oriented, well-educated, and well-connected segment of Ukrainian society, the sort of people who speak English fluently and feel at home in Europe and America. They are generally too young to have experienced the full force of the Soviet Union. Yulia Klymenko, an opposition member of parliament who fits that profile — she has represented the European Bank for Reconstruction and Development and served on the Ukrainian chapter of the board of Transparency International — told me that Zelensky had squandered a historic opportunity to dismiss the "crooks and idiots" who controlled the government at every level. She said he is instead using martial law to perpetuate his own rule. Two days after we spoke, the Zelensky-aligned chairman of the parliament said that implementation of the landmark anti-oligarchs law, including publication of a register of oligarchs, would be suspended until after the war.

Roman Ilto, another cosmopolitan type, works for the Swedish Embassy in Kyiv on energy and environmental issues. Unlike many critics of the oligarchs, he witnessed their rise firsthand. In the early 2000s, after studying at Harvard, he returned to Ukraine to work for a steel and mining company. That was his first exposure to "clan culture," he told me over breakfast at my hotel in central Kyiv. In those days, listening to the incessant talk about the rivalry between Kolomoisky and Akhmetov, he began to understand oligarchs as the organizing principle of Ukrainian political and economic life. In 2016, he joined Ukrnafta, the state-controlled oil and natural-gas giant, and spent nearly seven years there, including stints as head of government relations and investor relations.

Since the war began, Ilto said, control of the energy sector has been seized by a "nascent" oligarchic clan led by Yermak. Under a national security decree issued by Zelensky, the state had assumed full ownership of Ukrnafta and other strategically important companies. Perhaps, Ilto allowed, temporary nationalization was a "necessary evil" to keep the military supplied with oil and other vital resources. "Still," he said, "you wonder why there is no proper supervisory board, there are no proper controls. That is a perfect environment for corruption and wrongdoing" — for classic oligarch maneuvers like siphoning off assets from a state-run property. In October, about a month after my conversation with Ilto, Ukrnafta's leadership announced that an independent supervisory board would be formed for the company by the end of 2023.

Ilto flagged another top Yermak deputy, Rostyslav Shurma, who served the Akhmetov clan for years before assuming oversight of energy and other sectors of the economy for the Office for the President. Like Oleh Tatarov, Shurma is cited in Kyiv circles as another cog in the Yermak machine. "He kind of acts as a cashier for Yermak and the Office of President," said an ex-Zelensky government official who declined to go on the record for fear, he said, of becoming a target of the Yermak team. In a lengthy September piece, Ukrainska Pravda portrayed Shurma as a mini-empire builder. The paper, which is owned by a private-equity firm headed by a Czech-born businessman who served on the board of Transparency International Ukraine, cited a "scandal" in which the state bought electricity from solar plants co-owned by Shurma's brother, even though the plants were no longer connected to the Ukraine energy grid. Asked by Time about the matter, Shurma called it a "piece of shit" thrown at him by Zelensky's political enemies.

Still, back in the States, I found it hard to dismiss the widespread anxieties over the rise of a new oligarchy. Was Ukraine, even under a professed anti-oligarch president, really so different from Russia and other post-Soviet countries, where state-controlled companies serve as notorious havens for siphoning off critical assets? It could be, as some people in Kyiv are convinced, that the Zelensky-Yermak team is building its own clan "to basically out oligarch the oligarchs," Henry Hale, a specialist in Ukraine at George Washington University, told me.

Officials in Washington are certainly worried about American tax dollars disappearing down a rabbit hole of Ukrainian corruption. "Are we concerned about the protection of taxpayer money?" said Latesha Love-Grayer, the director of international affairs and trade at the Government Accountability Office. "Absolutely." The congressional watchdog agency, she told me, is participating in monthly meetings on the issue with representatives from the State Department, the Defense Department, and the Agency for International Development. She noted that Iraq, Afghanistan, Haiti, and Bosnia and Herzegovina all offered cautionary examples of the potential for corruption in war-reconstruction efforts. Yet when I offered that a new oligarchic regime appeared to be arising in Ukraine, centered in the Office of the President, Love-Grayer refrained from comment. Her team has yet to set foot on the ground in Ukraine, she said, or to meet with government officials there.

For Biden, the issue of political corruption in Ukraine is both deeply familiar and especially thorny. As vice president, Biden handled the Ukraine portfolio for the Obama administration from 2009 to 2017. In 2015, a career State Department official raised concerns with a Biden aide that Hunter Biden's service on the board of the energy firm Burisma could complicate President Barack Obama's efforts to prod Kyiv into battling corruption. But the official, who later related the story in closed-door testimony to Congress, said the aide told him Joe Biden did not have the "bandwidth" to deal with the matter involving his younger son as his older one, Beau, was dealing with cancer. It was a desire to dig up political dirt like this on Hunter Biden's activities in Ukraine that led Trump to threaten to withhold military aid to Ukraine, leading to his first impeachment. (The White House did not respond to repeated requests for comment for this story.)

The worst-case scenario for Ukraine — a very, very "bad story" — is that Yermak's oligarchic bent intensifies to the point that Washington and allies in Europe retreat both from continued military assistance and from plans to pour massive amounts of aid into the country for postwar reconstruction. The Zelensky government, in response, ushers in yet another sorry chapter of corrupt, parasitic rule in post-Soviet Ukraine. Membership in the European Union becomes an impossible dream. Despairing citizens turn to violence in an effort to topple their oppressors. Ironically, it's a scenario with an eerie echo of how Russia under Putin devolved into the state-girded oligarchy it has become today.

But it doesn't have to be that way. A crucial difference between Russia in the Putin era and today's Ukraine is that Putin has crushed Russia's civil society. The press is cowed; anti-Putin political activists are imprisoned or exiled. In Ukraine, even as the Office of the President maintains wartime control of TV broadcasts, civil society remains vibrant. News outlets have trained their investigative sights on the Yermak crew. Anti-corruption groups abound, not only in Kyiv but in big cities like Kharkiv. Opposition figures in parliament, along with critics of the Zelensky government in the business and financial communities, are for the most part not afraid to make their voices heard. It's possible there will be a peaceful reckoning, one that will force the ouster of Yermak and his underlings and speed Ukraine's integration into the West.

To counter corruption, some in Ukraine are calling for the European Union to play a strong, even decisive, role in the postwar rebuilding of Ukraine. The EU, Roman Ilto told me, should create and administer a Ukraine-reconstruction agency for the management of rebuilding projects, to make sure the funds for the work do not fall into the wrong hands. "I think people would be happy about that," he said. "As long as power plants are rebuilt, the roads are rebuilt, housing is rebuilt — and the country is on a path to the European Union."

Ukrainians remain painfully aware of their reputation on the world stage. "Please remember that not all Ukrainians are crooks and idiots :)," Klymenko, the opposition lawmaker, texted me. "There are a lot of decent people who love our country" and are committed to building a free society, she said. That, of course, requires not only fair elections and an unrestrained press, but also freedom from the malign clutches of oligarchy. Ukrainians know from long and bitter experience that political independence means little without economic democracy. The Soviet Union bequeathed to the country a legacy of state corruption. Even if Ukraine succeeds at defeating Russia, the oligarchs could still win the war for its future.

Paul Starobin, a former Moscow bureau chief for Business Week, has been writing about former Soviet lands for a quarter century. His new book, "Putin's Exiles: Their Fight for a Better Russia" (Columbia Global Reports), will be published in January.