Ukraine Business Roundup — Shadow economy crackdown
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Editor's note: The following is the May 13, 2026 edition of our Ukraine Business Roundup weekly newsletter. To get the biggest news in business and tech from Ukraine directly in your inbox, subscribe here.
This newsletter wasn’t meant to be about illegal e-cigarettes in Ukraine. But I stumbled across a law enforcement operation yesterday — and immediately knew it would be the focus of this week's edition.
While running an errand on Tuesday afternoon at Kyiv’s central Gulliver mall, I noticed two very tall men, presumably law enforcement officers, standing at an e-cigarette kiosk as employees handed over merchandise for them to bag and log as evidence.
I walked into the shop right next to it and when the shopkeeper asked if I needed help finding anything (I really did), I told her I was just looking and pretended to shop while keeping a close eye on the operation. I know — it was a bit voyeuristic, but after writing about raids over the years without ever having seen one in person, I couldn't quite resist the opportunity.
Remembering my lunch break was ending soon, I finally admitted to the shopkeeper that I would need her help. As she was ringing me up, I thought I'd get in some gossip, and, leaning toward her, I quietly asked, "What's going on? Is it a search or something?" — knowing full well what was happening. "Mhm, all over Kyiv today," she replied.
A detective from the Bureau of Economic Security searching an illegal vape and e-cigarette vendor in Kyiv during an earlier raid on March 19, 2026. (Bureau of Economic Security)
Indeed, I quickly discovered that Ukrainian law enforcement had launched around 100 searches targeting illegal vape vendors across the country, not just the capital. Ukraine's Bureau of Economic Security searched and confiscated products from e-cigarette sellers in 12 regions, including Kyiv, Lviv, Odesa, and Zakarpattia, Pavlo Buzdyhan, the bureau’s deputy director, later told Kyiv Independent reporter Dominic Culverwell.
The operation comes as the bureau — under the leadership of Oleksandr Tsyvinsky, who took office last August after the government controversially tried to block his selection — ramps up efforts to tackle tax dodgers that cost the country up to $24.4 billion in lost revenue each year, Culverwell writes.
Ukraine's vape industry is flooded with dodgy producers and sellers that smuggle goods, hide up to 90% of their tax obligations from authorities, or manufacture vapes and liquids without a license, Buzdyhan told him.
In recent months, Tsyvinsky has worked to reform the bureau, once seen as a financial mafia that carried out heavy-handed raids, by focusing on reining in illegal businesses in specific sectors such as tobacco, alcohol, gambling, electronics, and construction, according to our reporting.
The mafia comment is important here. If you've been with this newsletter since its start in 2023, you might remember I wrote quite a bit about the bureau's raids back then.
At the time, when the Bureau of Economic Security (known here by its Ukrainian acronym, BEB) showed up, businesses would often rush to social media to post photos of armed men arriving to confiscate laptops and other equipment. The raids were referred to as "mask shows," because of the ski masks the officers would sometimes wear. The public would quickly side with the businesses, often distrusting law enforcement and assuming bad faith (even when it was the businesses up to no good).
Yesterday felt nothing like that. I described the two men bagging up evidence as "presumably law enforcement" because they weren’t wearing any official gear or markings. They were dressed in a professional navy blue color — resembling plainclothes detectives more than uniformed officers. The scene itself was calm, and they seemed to be speaking casually with kiosk staff as it unfolded.
I don't think the difference is random. Although I cannot say for sure, from Culverwell’s reporting on the bureau under Tsyvinsky, and from conversations I’ve had, it appears to me this is part of a broader effort to professionalize an agency long plagued by corruption and public distrust.
One person I recently spoke to with decades of experience working with Ukraine’s economic law enforcement said Tsyvinsky and his deputy appear unusually effective: They know how to communicate with the public, explain reforms, and — crucially — have tried to tackle problem sectors methodically, having open conversations with businesses about illegal activity before moving in.
The episode is an uplifting moment for a country that continues to be rattled by a high-profile corruption case that, just yesterday, saw President Volodymyr Zelensky’s former chief of staff, Andriy Yermak, charged with money laundering tied to the construction of a luxury residential compound outside Kyiv.
And when people wonder whether Ukraine is hopelessly corrupt, it’s worth remembering: there are those who are, and then there are those working day in, day out to help the country move past it.
The roundup: What else is happening this week
1. Top bank official suspended over Ukraine's biggest corruption scandal. Mykola Hladyshchenko, head of state-owned Sense Bank’s supervisory board, stepped down after alleged audio transcripts linked the bank to a corruption scandal last week.
2. EU backs Ukraine war compensation, funds from Russian frozen assets up for debate. EU foreign ministers agreed on May 11 that the bloc would ratify an agreement to set up a body able to award compensation to victims of Russia's war of aggression against Ukraine.
3. Hungary gives back seized Ukrainian bank assets. The move marks a de-escalation in tensions between Kyiv and Budapest after Hungarian authorities detained the assets — including $40 million, 35 million euros, and 9 kilograms (19.8 pounds) of gold — during transit from Austria to Ukraine.
4. US removes Ukraine from arms import restriction list. The adoption of these rules is expected to open the way for the permanent import into the U.S. of certain categories of Ukrainian weapons, ammunition, and their components, Ukrainian Ambassador to the U.S. Olha Stefanishyna said. The U.S. and Ukraine have also drafted a memorandum outlining a potential new defense deal, CBS reported.
5. Ukraine could receive first tranche of 90-billion-euro EU loan next week. "Everything related to Ukraine is my responsibility. It is the responsibility of the European Commission, so I hope that next week we will be able to send the first payments," Enlargement Commissioner Marta Kos said.
6. Centrenergo gets new CEO. Evheniy Harkavy has stepped down as head of state-owned electricity producer Centrenergo, with Serhiy Isachenko appointed as the new general director.
7. Ukraine launches national job program for people over 50. Prime Minister Yulia Svyrydenko announced on May 11 the launch of "Experience Matters," a retraining program for adults, as demand for workers continues to grow, particularly in construction and the defense industry.
8. In case you missed it — Ukraine is already running out of time to prepare Kyiv for winter, officials warn. Energy officials and experts say delays, political infighting, and underinvestment have left Kyiv unprepared for another winter of Russian strikes. Read more here.
Opinion
“I have had the same conversation about investing in Ukraine over 50 times since 2022, and the excuse keeps evolving into every possible variation,” Hans Braunfisch, geopolitics and strategy consultant, writes in a recent op-ed for the Kyiv Independent:
Four years ago, the reason not to invest in Ukraine was the war. Two years ago, it was the war plus worries about Western support. But then, Ukrainian defense tech did something inconvenient for all these excuses — it scaled to levels few could have predicted.
Those who don't follow the space are shocked by how vibrant Ukraine's startup market has become. Ukrainian startups accounted for around half of all European early-stage defense investment in 2025, per Brave1. While that's armed us with a strong stat to bring to the next meeting, the excuse of would-be investors has pivoted.
Investors nod along, then ask the newest iteration of the question: "But what happens when there's peace?" The implied worry is demographic collapse, labor shortages, a shattered industrial base, and a decade of reconstruction that gives investors the next round of heartburn and a new excuse to say "no."
Either our articulation of the opportunity is not resonating, or it's falling on intentionally deaf ears.
Read the full op-ed here.
Events
Online
How can Ukraine use 60 billion euros in EU defense funding effectively? Organized by the Center for Economic Strategy (CES), this session is part of its May review of the Ukrainian economy and will focus on the efficient use of EU defense funding. Details: May 21. 4 p.m.–5 p.m. Kyiv time. Register here.
Kyiv & elsewhere in Ukraine
UA Energy — International Exhibition and Conference on Ukraine’s Sustainable Energy Recovery. The event will gather policymakers, investors, financial institutions, and technology leaders with the aim of advancing a modern, independent, and more secure energy system in Ukraine. Details: May 12–14, Kyiv. Register here.
Ukraine Financing Forum. An in-person forum bringing together international financial institutions, investors, and Ukrainian corporates to discuss how capital is being deployed in Ukraine and how to scale investment for recovery and growth. Details: May 20. Kyiv. Register here.
V Foreign Investment Congress. An event bringing together global investors, businesses, and officials to support private investment in Ukraine’s recovery. Details: May 28–29, Kyiv. Register here. The Kyiv Independent will be a media partner at the event, and readers of this newsletter get a 10% discount using the promo code 2X3NP5.
Around the world
Business Forum: U.S. Private Sector Engagement in Ukraine’s Reconstruction. A forum connecting U.S. and Ukrainian officials, investors, and industry leaders on opportunities in Ukraine’s recovery across key sectors ahead of URC 2026. Details: May 18, 2026, 12:30–5:30 PM. Washington, D.C. Followed by a rooftop cocktail reception. Register here.
Ukraine Recovery Conference (URC 2026). A hybrid international conference focused on mobilizing support for Ukraine’s reconstruction and unlocking investment opportunities for Ukrainian businesses across key sectors. Details: June 25–26. Gdansk. More details here.
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