Corruption, secret contracts, and the mysterious deaths of top managers—this isn't the plot of another Western TV series, but the reality of the Ukrainian arms business.
The most typical representative of a company in this very specific business sector is Ukrinmash, now the leading specialized arms exporter in Ukraine…
Founded in the early 1990s to sell surplus weapons and equipment, the company was acquired by Ukrspetsexport in 1996. At that time, a somewhat triune picture of Ukrainian arms exports emerged. Only firms assigned to different agencies received state permission: Ukrinmash to the Ministry of Industrial Policy, Ukroboronexport to the Ministry of Defense, and Progress to the Main Intelligence Directorate.
These companies operated virtually independently across three segments of the arms market: the sale of old Soviet weapons from Defense Ministry warehouses; the production and sale of modern weapons; and research and development. It's important to distinguish between two spheres: legal and illegal supplies.
Roughly the same situation persists to this day, although Viktor Yanukovych himself attempted to overturn the system by ordering the closure of Ukrinmash, allegedly for its excessive independence in decision-making. However, even Yanukovych, who maintained a fairly tight grip on the vertical power structure, failed to do so. As a result, a "monster" called Ukroboronprom emerged, while other companies continued to operate de facto independently. While, of course, all contracts are formally signed by Ukroboronprom's management, tracking Ukrinmash's activities has become virtually impossible.
Ukrinmash's operations are quite profitable – in a short period of time, its managers established partnerships primarily with the Russian Federation, as well as Mongolia, China, Sri Lanka, and Cuba. The volume of its operations is rarely reported in the media; the author knows the only real figure: in 2013, the company signed contracts worth $18,3 million, of which $2,75 million was net profit. The most profitable area was cooperation with the A.A. Morozov Kharkiv Machine-Building Design Bureau, a leading Ukrainian enterprise specializing in the creation of tanks and other armored tracked and wheeled vehicles. It was through Ukrinmash that the Kharkiv company signed a contract with the Polish company Mista to license the Dozor-B light armored vehicle.
Armored car "Dozor-B"
However, this is only one aspect of the company's activities. According to Western sources, Ukrinmash has long been one of the leading suppliers of weapons and ammunition to the international gray arms market. In fact, the company's flag was used by a state that officially could not sell weapons to countries under international sanctions, unrecognized by the international community, or simply prohibited for moral reasons.
During the Kuchma era, Ukrinmash established cooperation with Libya, which continued from 2011 to 2013, when the country was engulfed in civil war and subject to UN sanctions. Most of these shipments remained largely undisclosed, but at least one case has become public. In 2011, a Sierra Leone-flagged vessel carrying ammunition was detained in Greece en route to Libya. The cargo belonged to Ukrinmash, and the investigation revealed some rather piquant details. The Ukrainian company purchased it from the Albanian Military Export Import Company and then, with the help of an Armenian broker, officially sold it to the United Arab Emirates. Naturally, however, the Ukrainian managers simply could not have been unaware of the country of the cargo's final destination.
Western sources claim that it was the supply of unguided rockets and bombs from Ukraine for the Libyan Air Force's MiG-21s that turned the tide of fighting in July 2014 near Misrata. At least, it was a chartered Ukrainian Il-76 loaded with weapons that landed in Benin on July 20.
Since the 1990s, Ukrinmash has actively collaborated with Russia's strategic ally in the Arab world – Assad's Syria. For this, the country has been heavily criticized by the US administration. According to Wikileaks, Ukrinmash, even under Yushchenko, actively signed contracts with Syria and Yemen. It is currently unknown whether this cooperation continued after 2011, when the civil war began in Syria.
Between 2006 and 2008, despite the UN embargo, Ukrinmash signed three contracts to supply weapons to South Sudan, which at the time was still formally part of Sudan. The Ukrainian company supplied T-72 tanks, BM-21 Grad multiple launch rocket systems, and air defense systems. These deliveries became known to the international community after Somali pirates seized the Belize-flagged vessel Faina, carrying 33 tanks. Although the contract was formally signed with the Kenyan government, the destination of the weapons was clear to everyone.
In 2008, the Bosnia and Herzegovina Ministry of Defense sold 100 rounds of ammunition to Ukraine. However, according to Western sources, the entire shipment went directly to the Democratic Republic of the Congo, where supplying weapons and ammunition is considered "bad form" due to the virtually constant fighting and genocide of civilians.
The downside of the company's semi-legal activities is the fate of its top managers. Since December 1991, Boris Marusich had headed the state-owned foreign trade investment firm Ukrinmash. However, after the 1994 elections, he began to have serious problems with the "powers that be," which culminated in a rather peculiar traffic accident on April 24, 1999, in which he died mysteriously. Marusich was replaced by Vladimir Dudko, a colleague of Kuchma's from Yuzhmash. Naturally, millions in arms sales flowed into the right pockets.
Naturally, every new president who claimed a stake in the arms deal first replaced the company's director. Thus, with the arrival of Yanukovych, a certain Stanislav Khosh was appointed under the patronage of Ukrainian Defense Minister Lebedev. It was easy for Khosh, a native of Sevastopol, to secure the minister's support—their families' long-standing business ties helped. It's no secret that Lebedev, before his appointment as Ukrainian Defense Minister, was a major construction businessman in Crimea, and, in fact, he remained one after his appointment.
Under the watchful eye of P.V. Lebedev, who served as Alexander Yanukovych's "overseer" for the military-industrial complex, another Khosh (his younger brother, Denis (born 1985)) was appointed one of the heads of the Ministry of Defense's property sales department. Under their watchful eye, Khosh and Lebedev launched a massive sell-off of military property, with the Russian Federation playing a leading role. The most striking example of this anti-state activity was the signing of a contract for the maintenance of Mi-17 and Mi-171 aircraft for the Air Force of its northern neighbor at very low prices.
After the victory of the Euromaidan, Anatoliy Maiboroda, a longtime employee, joined the organization. However, in September 2014, he was dismissed amid scandal. He naturally attempted to portray himself as a victim of the corrupt system's machinations. However, in fact, he was removed due to a media scandal involving the sale of military weapons on the domestic market. It is known that in the first half of 2014, Ukrinmash sold 35900 AKM assault rifles (7,62mm caliber), 1237 RPG-7V grenade launchers, nearly 5,000 aircraft missiles, and 60 Fagot anti-tank missile systems. Where these weapons went remains unknown—whether they were purchased by volunteers to arm volunteer battalions, pro-Russian terrorists in the Donbas, or whether they were sold to other countries.
The decision to sell weapons on the domestic market during a time of external aggression and military action is simply "outrageous." In any civilized country, upon the outbreak of hostilities, the Cabinet of Ministers would have decided to halt all sales of weapons and military equipment, both domestically and internationally, and to redirect all such resources to supply those fighting the aggressor. But the government not only failed to halt the plundering of military equipment, it actually encouraged it.
In the first half of 2014, the Ministry of Defense reported the sale of military equipment worth almost 84 million hryvnias. Of this sum, government-authorized intermediary companies raked in almost 3,5 million hryvnias in commission fees, while over 17 million went to "organizing the sale" of this equipment. The most cynical part is that, in fact, most of these weapons and equipment were purchased by volunteers using funds from ordinary people who generously donated their own hard-earned money.
According to well-known volunteer Svetlana Zvarych, who was involved in supplying the Azov Battalion in 2014, she repeatedly encountered intermediaries selling equipment and weapons from the Ministry of Defense: "We didn't buy anything from the Ministry of Defense itself. But we did buy from its intermediaries. Among the latter were BAT-2 road layers, MDK-3 trench excavators, and IMR engineering and mine clearing vehicles. This engineering equipment is essential for clearing checkpoints and defusing mines. Azov Battalion Commander Andriy Biletsky ordered the BAT-2 and IMR to be found and delivered to the east. We began our search. After just our first two calls to phone numbers published on "auto sales" websites, sellers contacted us and offered us the equipment we needed for $20. The sellers also admitted that the vehicles were registered with the Ukrainian Ministry of Defense. That is, we must pay 20 thousand dollars for each unit and then independently obtain these BAT and IMR from the Ministry of Defense.
A month and a half ago, in a desperate situation, we bought a BRDM-2 from intermediaries for $18 and an MTLBU tractor for $14. The cynical nature of this deal was that the "sellers," knowing every penny we had was donated, demanded payment only in cash and only in dollars. And we had no choice.
Leonid Kryuchkov was appointed to replace Maiboroda , against whom the company's staff actively opposed, considering him tainted by the corruption schemes of the previous management.
Leonid Kryuchkov
Under his leadership, Ukrinmash focused on purchasing weapons abroad for the security forces. Several contracts were signed during his tenure, some of which caused considerable public controversy. One such example was the contract for 25 British-made Saxon armored vehicles from the 60s. Although the initial skepticism has subsided, largely due to the military finding a worthy use for these rarities, a bitter aftertaste remains. Far more questions remain regarding the purchase of equipment from the American company ATN Corporation, which, as journalists have uncovered, was actually a shell company purchasing Russian and Ukrainian equipment and selling it to the Ukrainian government. Larger contracts with the American companies Defense Technology, Barrett Firearms, and the French company Thales have remained largely undisclosed.
Ultimately, in October 2015, the personnel committee of the state-owned concern Ukroboronprom selected Serhiy Slyusarenko, a top manager at BRAIN Computers, as CEO. His arrival is seen as heralding a new chapter in the company's operations. Let's hope the choice was the right one.
In conclusion, I'd like to say a few words. Amid the ongoing debate both in the West and here about the possibility of supplying lethal weapons, one of the American arguments seems quite appropriate and timely: Ukraine is quite capable of providing its own army with modern weapons, but to do so, it needs to establish order both within the military-industrial complex itself and in the arms export sector.
Ernest RODIMTSEV, for NEXT.net.ua
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