Ok, there is a lot of bad karma around this whole anti corruption gig. Let me make a positive contribution providing a SOLUTION. 

Message to IMF/EU/WB/NGOs - look let’s face it Ukraine is endemically/systemically corrupt. No one could survive in Ukraine without playing to the former rules - think petty and elite corruption. I am not blaming anyone but that’s the way it was/is. Not sure I would be any different in such a setting.

The anticorruption court is a great idea. Ukraine needs it. But Turkey’s don’t vote for Xmas and the Rada is never going to vote to create a truly independent anti corruption court if that does logically mean they all go to jail for past misdemeanours - and I am sure there are plenty of them. That means loads of time is going to be wasted and a game played out with elites pretending they are serious about creating institutions without doing anything which has effect and changes behaviour. The reality is they are not - they are terrified by the prospect. And in the end you should care about changing behaviour now, and in the future. 

So here is my solution - remember my idea two years back of the Maidan Truth and Reconciliation Commission and Windfall Tax idea, let’s combine that with the e-declarations and anti corruption court idea.

Here how it works - on the back of e-declarations impose a 10% one off tax on all assets declared. You pay it and you are free from future prosecution for historical claims. But your declaration has to be honest. If it turns out you lied, the book is thrown at you 100% tax on assets, seven years in a really bad jail. But then the anti corruption court only takes future cases and again the penalties have to be brutally harsh, 100% confiscation and serious jail time. 

The amnesty for asset declarations does not apply where non financial wrongdoing is proven - eg where physical violence has been used. 

The windfall tax should be used to fund a proper judicial system where judges/prosecutors/police get decent salaries and don’t have to resort to bribes.

Let’s assume 5% of GDP has disappeared annually in graft, on average GDP of USD100bn over 25 years and a 10% windfall tax we get to USD12.5bn in windfall tax revenue. I would take that - that would fund the criminal justice system for a few years until lower corruption kicks in, informality reduces, the tax take increases as the economy grows. Bingo.

You could make this more palatable at the lower end by having a minimum threshold for being subject to the windfall tax, say 50k (dollars).

And let’s encourage everyone to get on with it. So sign up to this deal and the next IMF tranche gets freed up, that also kicks start World Bank and EU money - adding up to what USD3bn at least in a first instalment. Markets love it, credit spreads crash 100bps tighter, you come to market, do an exchange offer to get rid of the last bits of the debt service peak in 2019-20, and even get enough new money to retire those dreadful GDP warrants. Everyone is happy.

I am a simple man, and prefer simple solutions. Anyone who has met me knows that.

Alternatively we can try the MBS approach in Saudi, block off 200 rooms at the Premier Palace (some irony there given so many deals were surely “crafted” in the lobby bar there over the years), and have a Forbes Top 200 Ukraine pjamama Party there for a few weeks and until the caviar and Perrier (or more likely Borjami) runs out.

** Please note that any views expressed herein are those of the author as of the date of publication and are subject to change at any time due to market or economic conditions. The views expressed do not reflect the opinions of all portfolio managers at BlueBay, or the views of the firm as a whole. In addition, these conclusions are speculative in nature, may not come to pass and are not intended to predict the future of any specific investment. No representation or warranty can be given with respect to the accuracy or completeness of the information. Charts and graphs provided herein are for illustrative purposes only.”