Ukrainian Arms Exports That Never Happened
Since the start of the full-scale invasion, Ukrainian arms exports have effectively been halted, as the country needed resources to resist the Russian Federation.
For over a year, however, Ukrainian arms associations have been calling for the resumption of exports, arguing that companies need revenue to grow—so they can produce more defense equipment for the Ukrainian military. If exports are not opened, businesses are prepared to relocate abroad and supply products to Ukraine from there, resulting in a loss of both funds and intellectual resources.
In November 2025, the National Security and Defense Council (NSDC) announced that Ukraine would resume exports of its own weaponry. Manufacturers with surplus capacity would be allowed to sell products to foreign partners—under full state control.
Despite significant demand for Ukrainian drones, none have yet been delivered to the Middle East.
Moreover, according to Oboronka, the State Service for Export Control (SSEC) suspended the export permits of Ukrainian defense manufacturers to Middle Eastern and Persian Gulf countries as of March 2. SSEC also halted the review of new license applications.
Oleksii Melnyk, co-director of the Center for International Security and Foreign Policy Programs at the Razumkov Center, suggested that Ukraine is prohibiting drone manufacturers from selling directly to the Middle East. The state aims to reach a comprehensive solution for exchanging interceptor UAV technology for arms and investments.
At the end of March, President Volodymyr Zelenskyy stated that Ukraine is preparing for the “proper opening” of arms exports to Middle Eastern countries. According to him, Kyiv plans to supply partners not only with interceptor drones but also with defense lines, software, electronic warfare systems, and more.
He also noted that Ukraine has already received 11 requests from countries neighboring Iran, European states, and the United States for security support against Iranian “Shahed” drones and similar threats. Meanwhile, Presidential Advisor Oleksandr Kamyshyn told Forbes that companies must first secure contracts with foreign governments before exports can begin.
According to NAKO, Ukrainian authorities should quickly formalize the conditions and rules for exporting weapons and technologies to the Middle East. This is crucial not only for transparency and accountability in the defense sector but also for responding promptly to current market conditions. Ukraine currently has a unique opportunity to enter the global arms market, but this “window of opportunity” will not remain open for long.
Ministry of Defence Moves to Automated Drone Procurement for the Defence Forces
On March 10, Ukraine’s Minister of Defence, Mykhailo Fedorov, announced that the need for UAVs will now be determined automatically, based on frontline data.
“I signed an order introducing a new approach to drone procurement. From now on, demand for drones will be generated using accurate battlefield data—without human bias, subjective influence, or corruption risks,” he said.
Under the new system, the General Staff will create a list of required equipment based solely on technical specifications, without specifying particular models or manufacturers. Which drones will be purchased for units will be determined by a UAV ranking compiled from multiple digital systems.
According to the minister, moving from manually determined needs to an automated model will eliminate the “zoo” of ineffective solutions that soldiers had to modify by hand in the trenches.
“The state will purchase only what actually flies, hits targets, and has proven its effectiveness on the frontline,” Fedorov emphasized.
Last year, the National Agency on Corruption Prevention (NACP) conducted a study highlighting key risks in how the General Staff defined UAV needs. The report noted that procurement was often based on model names rather than technical specifications. It also found significant inconsistencies during UAV testing, with some drones undergoing trials while other manufacturers were taken at their word.
Chronic Corruption Problem in Military Food Supplies
In February 2026, the State Bureau of Investigations (DBR) arrested the head of the food service at a unit in Dnipropetrovsk region, Kyrylo Svyrydov. By allowing low-quality food to be delivered to the unit, he earned enough to buy an apartment in Bali, cars, and expensive clothing. According to the DBR, weekly embezzlement amounted to one million hryvnias. The food service chief split the profits with the supplier company.
From her sources, Tetiana Nikolaienko, Deputy Chair of the Public Anti-Corruption Council of the MoD and Senior Researcher at NAKO, learned that the other party in the corruption scheme was Busky Canning Plant (BCP).
Law enforcement publicly disclosed the name of the food service chief but not the company. This is a common pattern: authorities investigate the actions of the unit officer but rarely hold company executives accountable.
Meanwhile, BCP won contracts worth 10.06 billion UAH through competitive bidding, while simultaneously leading in complaints about product quality. This information was provided by the State Logistics Operator (a Ministry of Defence agency responsible for army procurement) in response to an official NAKO request.
In another investigation, Tetiana Nikolaienko revealed a dialogue in which a plant manager pressured the food service chief to replace chilled meat with frozen meat in supplier orders. The logic is simple: chilled meat cannot be secretly “watered up” to increase weight, whereas frozen meat can.
Instead of addressing the scandal with the food service chief, the defence procurement agency showcased a collaboration with celebrity chef Yevhen Klopotenko.
As a result, a compilation of the best culinary practices from various military units is planned—a recipe collection aimed at improving the food provided to Ukraine’s defenders.
According to NAKO, the Ministry of Defence should first streamline the supply of products to units to ensure all goods are high-quality and meet soldiers’ expectations. Only then should the ministry focus on organizing the best practices of military chefs.
Functional Audit of the Defence Procurement Agency by NATO International Board of Auditors
Ukraine’s defence procurement system is preparing for a major review. At the initiative of its own Supervisory Board, the Defence Procurement Agency (DPA) will undergo a functional audit conducted by the NATO International Board of Auditors (IBAN).
The term “audit” is usually understood as a check of accounting data and financial statements of a legal entity according to accounting standards—essentially, verifying receipts and balances. In the case of NATO’s IBAN, however, the process is much more comprehensive.
According to Tetiana Nikolaienko, Deputy Chair of the Public Anti-Corruption Council of the MoD and Senior Researcher at NAKO, a functional audit analyzes the “life activity” of an organization. That is, it examines how the organization performs its functions, including processes, structures, and role distribution. It assesses how the updated Agency—since early 2026, the merger of two procurement agencies, DPA and DOT—operates during contract implementation, whether there are artificial barriers for businesses, and how projected costs affect competition.
Key stages of the audit will cover procurement planning, contract procedures, contract execution management, and the internal control system.
Why is this important now?
Since the full-scale invasion, defence sector funding has increased dramatically. In the 2026 state budget, the security and defence sector accounts for approximately UAH 2.8 trillion, roughly 27% of the country’s GDP.
With more funding come higher risks. Recent scandals—from questionable body armor contracts to the delivery of low-quality heaters—show that isolated cases can not only cause multi-million losses but also undermine trust among partners and the public.
Involving NATO’s IBAN ensures that the audit will consider the specific features of the security and defence sector, providing full independence and professionalism. Funding for this initiative is also covered by NATO partner projects.
Diversification of Procurement by the Defence Procurement Agency
Following high-profile scandals involving unfulfilled ammunition contracts, the Defence Procurement Agency (DPA) is introducing a diversification mechanism.
The major change will affect the procurement of UAVs, ground robotic complexes, and ammunition. The Ministry of Defence has amended procurement procedures, allowing the Agency to engage multiple suppliers to fulfill a single order.
The decision to diversify did not emerge in a vacuum. It followed a crisis that became public in March 2025. At that time, the Public Anti-Corruption Council of the Ministry of Defence, with support from NAKO, issued a statement highlighting that the state continued ordering large batches of 120-mm mortar rounds from factories that had already failed previous contracts by more than 50%. Ordering additional large volumes from these “defaulting” factories created significant risks for frontline supply, the council stressed, urging the Supreme Commander-in-Chief’s Office to intervene.
When all expectations rely on a single manufacturer, any force majeure—from damage to production facilities to a logistical collapse or simple malpractice—leaves the military without ammunition.
How will the new system work?
From now on, the Agency will not select a single supplier but will allocate orders among several participants according to a specific formula. Key rules include:
- Price threshold: If a participant’s price exceeds the lowest market offer by 30% or more, they are automatically excluded from the procurement lot.
- Fighting intermediaries: If multiple distributors offer products from the same manufacturer, the contract goes to the one with the lowest price.
- Production capacity audit: Before signing, suppliers are checked to ensure they can physically produce the required quantity within the set timeframe.
The final decision on the allocation of volumes is made by the Agency’s Collegial Body, and draft contracts are approved by the Ministry of Defence.
If a supplier fails to meet contract terms, their share of the order is promptly redistributed among other participants following the rules above.
Adopted Information Disclosure Policy for the Defence Procurement Agency
Transparency in the defence sector during an active phase of hostilities is always a balancing act. On one hand, there is a need to protect sensitive data from adversaries; on the other, there is a legitimate public demand to understand how hundreds of billions of hryvnias are spent.
In March 2026, the Defence Procurement Agency (DPA) took a step toward accountability by adopting an Information Disclosure Policy.
For 2026, the agency’s budget is UAH 585.2 billion. By comparison, in 2025, the budget was even higher—UAH 633.3 billion. As such, the public expects at least general information on contract execution and quota distribution—for example, between intermediaries and direct manufacturers. Last year, however, the DPA even classified data on overdue accounts receivable.
In response to public criticism, the Information Disclosure Policy was developed by the DPA Supervisory Board in cooperation with the Public Anti-Corruption Council of the Ministry of Defence.
The adopted Information Disclosure Policy provides for quarterly disclosure (no later than 30 days after the reporting period) of total budget commitments, current overdue accounts receivable, and the total value of all contracts signed; annual disclosure across the following categories:
- Contract execution: Actual deliveries as a percentage of planned, by category (UAVs, GRCs, ammunition, food supplies, clothing, fuel and lubricants).
- Contract geography: Share of orders with national manufacturers versus direct international contracts.
- Financial discipline: Amounts of accounts receivable, accounts payable, and budget commitments.
- Claims and litigation: Number of lawsuits filed against unscrupulous suppliers and funds recovered.
- Audit and compliance: Results of independent audits and the state of internal control systems.
The Agency emphasizes that the document aligns with OECD corporate governance principles and the recommendations of the Ukraine–NATO Strategic Review of Defence Procurement.
Personnel Transformations in the Ministry of Defence
In March 2026, the Ministry of Defence underwent significant management changes. The new additions to the ministry’s team include:
Mstyslav Banik – Deputy Minister of Defence for Procurement Reform, a traditionally high-risk area for corruption within the ministry. His key mission is to scale the “Mathematics of War” concept across all types of weaponry. This involves moving from chaotic request formation to transparent planning based on accurate data, efficient logistics, and systematic analysis of the Armed Forces’ needs.
Vasyl Shkurakov – Deputy Minister of Defence for Finance and Internal Audit. He will focus on financial discipline and effective management of all funding sources, including the state budget, international aid, and loans. His tasks include implementing high-quality budget planning, strengthening internal audit to minimize risks, and digitalizing financial reporting. This approach will allow resources to be directed exclusively to priority frontline needs, grounded in thorough economic analysis.
Yurii Myronenko – General Inspector of the Ministry of Defence, who will serve as an independent auditor and controller. He will verify whether army activities align with actual frontline needs and document the real state of affairs within the Defence Forces. Objective reports from the General Inspector are intended to form the basis for rapid adjustments in state defence policy.
According to NAKO, these personnel changes are part of a broader strategy for digital and structural transformation of the ministry and an effort to address existing corruption risks. Minister Mykhailo Fedorov continues to implement his signature “digital approach,” transforming defence sector management into a risk-oriented and transparent system.
Thank you to the New Democracy Fund for supporting the creation of this review.
First photo: SkyFall