KIEV, Nov. 19 – President Viktor Yushchenko on Monday ordered the firing of Ukraine’s top customs officials and the creation of a new department at the security service to crack down on an estimated $25 billion worth of illegal imports.

The measures come after a special anti-contraband operation by the SBU, the security service, failed, apparently due to sabotage from the top customs officials.

“You have been losing courage, you don’t have energy to resist swindlers,” Yushchenko said addressing Oleksandr Yehorov, the head of the State Customs Service. “Who is directing you?”

Yushchenko joined a meeting of law enforcement agencies, including the Prosecutor General Office, at the SBU headquarters in Kiev in his most significant attempt so far to crack down on illegal imports.

He ordered the replacement of the entire administration at the Southern Customs Office, which supervises most of the imports coming to Ukraine via Black Sea ports. He also ordered the dismissal of a number of lower level officials, including the head of the Odessa Sea Port and the Customs Office in Mykolayiv.

The measures are the most significant attempt to curtail illegal imposts since early 2005, when then-Prime Minister Yulia Tymoshenko launched her ‘Contraband. Stop’ campaign.

The campaign sent mobile SBU teams roaming throughout Ukraine with the authority to stop and to check papers of any cargo shipment. But the latest meeting at the SBU shows that campaign, as well as the most recent operation, had failed.

“The contraband is now on a scale that it is threatening the nation,” Yushchenko said. “The customs control in Ukraine is being rapidly destroyed.”

Now, the SBU within a week will have to submit a plan to create a completely new counterintelligence department that would have sweeping powers to fight corruption and the illegal imports. “This department should become a real tool,” Yushchenko said.

The measures seek to address one the most controversial sectors of the Ukrainian economy, which is thought to have an annual turnover of up to $25 billion.

Yushchenko, citing expert research, said up to 70% of goods in high demand in Ukraine are thought to come via contraband, when traders completely fail to pay taxes and customs fees. This, he said, costs Ukraine up to 60 billion hryvnias, or $12 billion, annually.

Another UAH65 billion worth of goods are imported via the so called “gray” contraband in which traders do pay some taxes and fees, but substantially less than required by law.

Both of the ways to import illegal goods represent a major chunk of the shadow economy, estimated at an annual UAH180 billion, that fuels corruption in Ukraine. And Yushchenko’s measures seek to eradicate that.

“Nothing - from personnel reshuffle to punitive actions - will stop me from achieving results,” he said.

The developments come after the SBU’s most recent anti-contraband operation, known as Tsunami, failed following months of major opposition and sabotage from the top customs officials.

“We can’t handle that if the top officials are hindering us,” Valentyn Nalyvaychenko, the acting head of the SBU, said. “This was not just corruption, this was the high level of corruption.” (tl/ez)