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15 February, 2022
A secret program for developing ammunition production ended with numerous courts and criminal cases - NAKO

State defence plants could not spend budget funds to launch the modern production of ammunition in various calibres. As a result, the Ukrainian Security Center, authorized by the government, is trying to recover more than one billion UAH through the courts.

This was reported by NAKO with reference to the register of court decisions and written responses of the Ministry for Strategic Industries, which is responsible for modernizing the defence industry.

State Enterprise Ukrainian Center Security, which is the sole administrator of budget funds for programs to modernize the defence industry and create ammunition, initiated lawsuits in 2018 against state defence plants in the amount of 1.07 billion UAH.

“Thus, the government was unable to launch the planned munitions production lines on time, for which it allocated funds,” NAKO said.

The ammunition development program is secret, and therefore it is virtually impossible to conduct an independent evaluation of the program’s effectiveness. Only through court cases can we see the failure to modernize the domestic defence industry.

“The main reason for non-use of funds was the failure of enterprises-executors of the state defence order to fulfill their obligations under contracts,” said the Ministry for Strategic Industries in response to a request from NAKO.

Among the most high-profile cases against defence plants, experts singled out the following: state-owned company Spetsoboronmash, which manufactures equipment for combat missiles, returned 13.7 million UAH to UC Bezpetsi, which was to be spent on production modernization; and the Lviv Armored Plant returned 3.3 million UAH.

The dispute between UC Security and a manufacturer of combat missiles, the state company Artem, which is to return 453.9 million UAH, is also ongoing. The company was not able to spend these funds on time to upgrade its own production line.

This dispute arose during the implementation of contracts in 2017. According to the ​​National Anti-corruption Bureau of Ukraine (NABU), then the director of the state enterprise Security conspired with officials of the Ministry of Economy to involve a foreign company, Gray Fox Logistics, to supply a strategically important line for manufacturing shells of 152 and 155 millimetres. The state holding company Artem made a prepayment of 217 million UAH but did not receive the equipment.

High-profile cases of the Ukrainian Security Center with arms manufacturers at the expense of the budget.

In 2021, a lawsuit filed by UC Security Center demanding the return of 170 million UAH was directed to the Makarov Southern Machine-Building Plant, which produces rocket and space technology. Two more lawsuits totalling 183 million UAH were filed against Pavlograd Chemical Plant, a manufacturer of explosives and rocket fuel.

NAKO recommends that the Ministry for Strategic Industries take measures to increase the effectiveness of the defence modernization program. Namely:

  1. Reduce the level of procurement secrecy within the budget program to modernize the defence industry in order to ensure the principles of competitiveness and transparency in bidding.
  2. Introduce quarterly reporting by the Ministry for Strategic Industries on the results of the indicators for ammunition creation and modernization programs.

Earlier, NAKO reported that the Ministry for StrategicIndustries has implemented a program to modernize the defence industry by only 9% of the planned expenditures in 2021.

Photo - from the website of the Lviv Armored Plant