Arms procurement for Armed Forces can spark major scandal in Ukraine - military expert

He shared the information on Espreso TV.

Serhiy Zgurets emphasized that the Ukrainian Armed Forces are not receiving the necessary scarce ammunition, and the government is irrationally using state funds to strengthen defense capabilities. "At least, this preliminary conclusion can be drawn in light of the extremely strange order №1191-r signed by Prime Minister Denys Shmyhal on November 29, 2024," he says.

The order stipulates that, with the consent of Ukraine's Ministry of Defense, the State Border Guard Service is delegated authority to execute the budget program 2101150 "Development, procurement, modernization, and repair of weapons, military equipment, and supplies" amounting to 23 billion UAH for purchasing defense goods for the Armed Forces. This includes ammunition for several types of deficit items.

"We have been analyzing this situation for several days, and it seems we are on the verge of a major scandal involving the procurement of ammunition for the Armed Forces through the State Border Guard Service. This involves 23 billion UAH supposedly allocated to the State Border to procure ammunition for transfer to the Armed Forces. I call this a scandalous issue because, under current legislation, we cannot disclose the scope of these contracts or the entities involved. However, let me speak metaphorically. This Cabinet decision was issued on November 29, just two days after the State Border Guard Service head received a proposal from an intermediary firm on November 27 to procure ammunition through the State Border for subsequent transfer to the Armed Forces," commented Serhiy Zgurets.

The expert added that he is highlighting only the main concerns about this deal, after consulting with several specialists familiar with its details, and “considering the wartime restrictions on disclosing detailed information about arms contracts or intentions.”

The deal began with a letter sent by the head of the State Border Guard Service of Ukraine, General Serhiy Deyneko, to the Minister of Defense and other security ministers, informing them that the Border Guard Service had received commercial proposals from a brokerage company regarding the supply of ammunition for rocket and artillery systems. Two days after this letter, the Cabinet of Ministers issued a decision to allocate funds for these potential large-scale purchases in response to the commercial proposals from the Polish intermediary company. The Ministry of Defense approved this.

"Contrary to the established procurement infrastructure of Ukraine's Ministry of Defense, which is already functioning effectively, it is surprising that there is a desire to delegate the relevant procurement powers to the State Border Guard Service, which has never carried out such large-scale ammunition purchases and lacks the necessary specialists and competencies for inspecting available ammunition and analyzing production capabilities," Zgurets remarked.

Dubious proposal for arms purchase may signal fraud

According to the military expert, given the situation, questions arise that need answers, at least at the level of control bodies overseeing this process.

1. The Ministry of Defense of Ukraine and Minister Rustem Umerov have repeatedly emphasized the importance of procuring weapons through the Defense Procurement Agency. However, the agency has not received any such unique proposals, like the one from the head of the State Border Guard Service. The agency, at least according to its leadership, aims to minimize risks and costs by contracting arms and ammunition directly from manufacturers or their official representatives. Yet, proposals from a Polish company, which does not fall into either of these categories, were quickly accepted -  bypassing the agency.

2. The commercial proposal from the Polish intermediary company includes five types of ammunition. These are new products with deliveries within a very tight timeframe. The range includes 120-mm mines, mortar shells, reactive projectiles for multiple rocket launchers, and critically scarce Soviet-standard artillery shells in 122 mm and 152 mm calibers. The proposed supply volumes for this new product, supposedly manufactured in 2024-2025, are so high that they equal the total annual production of a large arms factory. However, it is important to remember that all European or Eastern European manufacturers of this type of ammunition are already fully booked with orders for the next year and physically cannot produce such additional volumes.

3. The prices proposed by the Polish intermediary are higher for certain types of ammunition compared to previous purchases made by Ukraine. Of course, in the context of total shortages and high demand, it's hard to talk about market prices. However, the demand for 100% advance payment is suspicious—not only for available ammunition but even for those planned for delivery in 2025 from production. Such an advance payment is abnormally high, and a full 100% prepayment immediately after the contract is signed is, to say the least, not typical for procurement practices. Normally, even before a 10% advance payment, several pre-contractual steps are carried out (such as establishing the manufacturer, inspecting the production facilities, confirming the availability of goods in the seller's warehouse, etc.). The Defense Procurement Agency would not even consider such a commercial proposal from the Polish company as something worth attention, especially when it ignores timely payments to domestic arms manufacturers, which blocks the development of Ukraine's own defense industry.

"The prices for these munitions are 5% to at least 8% higher than average market rates - if it's even possible to define market rates under these conditions. Yet, this is being done bypassing the Ministry of Defense, which has the Defense Procurement Agency. This agency was specifically established to sign contracts with suppliers, minimize costs, and ensure oversight of stock availability at manufacturers or intermediaries. However, this process circumvents the Procurement Agency based on just one letter from the State Border Guard Service head," noted the military expert.

4. The Polish intermediary company is not new to the arms industry. I heard that the company already has unfulfilled contracts with the Ministry of Defense for supplying new ammunition - or rather, they were canceled due to force majeure circumstances. At the same time, according to preliminary data, more than a third of the Border Guard’s budget for purchasing weapons and military equipment for its own needs since the start of the full-scale invasion has been allocated to this Polish company. The company’s share in the Border Guard's supplies can, of course, explain such unlimited trust, but this explanation could also be qualified under the Ukrainian Criminal Code. As for the new deliveries, the Border Guard has never procured ammunition in such volumes as is currently being proposed, and it lacks the necessary specialists and competencies to inspect the available ammunition and analyze production capacities. By the way, the Polish company didn’t even indicate the origin of the goods.

5. The total volume of ammunition supplies from the Polish company, which the leadership of the Border Guard considers particularly important for Ukraine’s Defense Forces, is approximately five times larger than the 23 billion UAH already allocated in the government decision signed by the prime minister. This suggests that financial continuation was or is planned for this deal.

"After the first installments are transferred based on this strange government decision, don't say you weren’t warned about the risks of this deal – they are much larger in negative consequences than those already faced with the mine supply contracts through the 'Alpha' company. And this time, don't wait for a force majeure. It's already here," added Zgurets. "I think this government decision requires great attention from the expert community, considering all the risks of disclosing information related to these contracts. But I reiterate, there are serious doubts about the feasibility of executing this contract and using public funds supposedly allocated for ammunition. We will return to this issue within the limits of our legislation, and there should also be public disclosure of this matter," concluded Zgurets.

• On November 29, the Cabinet of Ministers of Ukraine approved a decision to allocate 150 million UAH for the purchase of weapons and equipment for the Main Intelligence Directorate of the Ministry of Defense.