Housing for military personnel: How money is being laundered in Ukraine

Author : Oleksiy Kushch

Source : 112 Ukraine

The war in Donbas only whips up appetites of corrupted officials, because the financial flow directed from society towards the maintenance of the military is significantly increasing.
21:47, 4 June 2019

Open source

Earlier, the former head of the National Guard of Ukraine Colonel-General Yuriy Allerov was detained in Kyiv by law enforcement officers. He is charged with causing loss to the state in the amount of more than 80 million UAH (2 billion USD). Along with the other issues, this event once again gave society a reason to estimate the scale of profits in Ukraine in conditions of war.

It's about "earnings" on the army and other law enforcement agencies. And the war only whips up appetites, because the financial flow directed from society towards the maintenance of the military is significantly increasing.

Related: Dismissal of National Guard head Allerov: Poroshenko's revenge or sanctions for corruption

According to the media, the scheme used by top officials was painfully simple and familiar. The National Guard first agreed with the developer on the implementation of a construction project in the center of Kyiv (Pechersk) and on the receipt of a part of apartments in this residential complex.

Then they were "exchanged" for apartments in another residential complex - in the uptown near the Boryspilska subway station. The difference in market value, which was formed as a result of this exchange, was clearly not in favor of the state. Two figures appear in the press: $ 5 million and $ 81 million.

The court will establish which of them is more real, as well as the guilt of the defendants. We are more interested in not the fact indicated above, and the personalities behind it, but the system itself, which was formed in Ukraine not for years, but for decades.

Related: Prosecution to ask court for arrest of ex-Commander of National Guard Allerov

The current system of providing housing for servicemen is, in fact, the gangrenous process of the old Soviet model, but with the only difference that then housing was eventually given, and in Ukraine it was rather equivalent to winning the lottery. This mechanism allowed the generals to enrich themselves. But let's move on to the system itself.

Each law enforcement agency has its own "portfolio" of land, which can be offered to investors. After all, there are no structures for housing construction either in the army or in the National Guard. All these sites were either separated from the structure of the former military camps, warehouses, and other decommissioned military facilities or provided by local authorities for the construction of housing for servicemen.

And here the so-called share principle has been used for a long time: a construction company builds housing on a plot of a security agency (as a rule, according to the highest market standards, because it is a purely commercial project) and transfers a certain percentage of ready-made apartments to the customer’s benefit (the army).

And here begins the first part of the "system", when at the stage of determining the "share" the first "bit" of corrupt rent is laid, because you can always get, for example, 10% instead of 20% of apartments from the developer.

Related: Ex-Head of National Guard Allerov arrested for 60 days

If the market capitalization of a residential complex of 50 000 square meters today in Kyiv is at least $ 50 million, then 10% of the "compensation" will amount to as much as 5 million. This is enough not only for retired generals but also for a house on the shores of Lake Garda in Italy.

Now there are more sophisticated schemes of embezzlement of army property where the developer will bring everything himself, right into the accounts of your personal company somewhere in the British Virgin Islands.

Allocation of housing for servicemen has long been turned into a convenient election meme in Ukraine, on the one hand, and the type of corrupt rent, on the other. The general, who received a service flat, then privatized it, then did the same but in another city, and five times in a row, become a member of the corrupt omerta, providing mutual concealment for other participants in the scheme.

And what about ordinary officers? Even allocating 13% more funds than a year earlier, the state will be able to provide apartments to the ones from waiting list only in half a century. But now there is no certainty that all these apartments will go to destination.

Related: 152 Crimeans do military service in Russia

A long time ago, a scheme in which the power structures receives the land for housing in the center of the city, caused great doubts in the context of its effectiveness. After all, everyone understands that the ordinary officer is unlikely to get an apartment in Pechersk.

In addition, the capitalization of these projects itself pushes for a more correct decision: to abandon building barter, to sell these land plots for a fair market price and with this money to buy cheaper housing in the suburbs, but in bigger quality.

As the practice of Western countries shows, there are more effective schemes for providing military personnel with housing.

Let's start with compensation for the cost of rented apartments for the officer: in the United States up to $ 1,000 is allocated for this purpose per month, in the UK - up to 500, in the Russian Federation - up to 490. In Ukraine, it’s a little less amount, but there are reasons for it, in particular, limited state budget.

But in all countries-members of NATO, and even in the Russian Federation, which took the NATO standard for solving the housing problem as a basis, there is one significant difference from Ukraine: they do not have a queue to receive permanent housing, but only a mechanism to provide temporary housing for military personnel services, including the monetary compensation mentioned above.

That is, the officer should not ask for a place in the hostel: the state simply allocates money to him for renting an apartment, and he himself can already choose the right option and save some money or pay extra for comfort.

As for permanent housing for military personnel, here we are different from most civilized countries. In Ukraine, housing is promised after 20 years of service.

In the countries of NATO and the Russian Federation, officers after the end of their service receive significant severance pay, the amount of which depends on the agreement or disagreement to refuse an increased pension. You can take the money right away, invest it in starting your own business or get a new profession, additional education and at the same time give up about 50% of pension payments. Or, on the contrary, to refuse the significant amount of one-time payments and to use the raised pension all life.

It also has a very important principle: benefits or money. But most importantly, in Western countries, military personnel buy permanent housing themselves but using the so-called military mortgage. In the Russian Federation, which took the Western standard as a model, after three years of service, the soldier does not pay interest on the mortgage loan, and the state repays the loan body during the entire service period.

Related: Leaders of Russia, Turkey seek to enhance military ties

Thus, motivation in long-term and impeccable service arises. Interest rate compensation is also available in Turkey (including reimbursement by the state up to 40% of the loan body), as well as in other countries.

This model, based on free choice, is the most effective because the soldier himself chooses where to buy housing. The state can only compensate for the interest rate on the loan and in some cases the body of it.

And no more unitary military camps, but only the purchase of housing with a military mortgage in the area or village, where the soldier wants.

In this model, both severance pay and a loan for permanent housing are key motivators for building a personal military career.

Well, in Ukraine, they still continue to live with thoughts about military camps, as a habitat for military retirees, and the logic of an endless apartment queue. After all, any queue implies that someone is looking after it.

And it affects the wallets of the greedy generals, steeped in corruption and the omerta of mutual concealment and mutual responsibility.

Related: Ukrainian military will not kneel before country's enemies, - Chief of Army's General Staff

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