Ukraine lost over US$1 billion on defence procurement in one year – NYT
Ukraine lost around US$1.2 billion in 2024 alone due to fraud, waste and mismanagement in defence procurement. Meanwhile, the country continued to award contracts to unreliable suppliers.
Source: The New York Times, citing classified findings from government audits for 2024 and 2025
Details: The newspaper examined three striking examples of defence procurement fraud identified in the audit reports.
In 2024, the Pavlohrad Chemical Plant supplied the military with thousands of defective mortar shells. Its director, Leonid Shyman, was eventually arrested in one of the most high-profile cases of alleged fraud in Ukraine's wartime defence industry.
However, even after it became clear that the shells were defective, government audit findings show that the Defence Procurement Agency (DPA) continued to award new contracts to Shyman.
For example, the government awarded a US$280 million contract while he was out on bail on corruption charges.
Overall, seven of Ukraine's 10 largest arms manufacturers received new contracts despite ongoing criminal investigations into fraud, failures to fulfil previous contracts or the arrests of executives on corruption charges.
Audit documents indicate that warning signs in procurement were disregarded and that overcharging or failures to fulfil delivery obligations rarely resulted in consequences.
Some companies were also awarded contracts without demonstrating that they were capable of supplying the weapons or without holding the necessary licences to do so. Auditors identified 18 companies that were awarded deals despite failing to fulfil previous contracts. Six of them had not successfully completed a single contract.
Around US$126 million was lost as a result of lower bids being disregarded and weapons being purchased at inflated prices. Auditors said the contracts had been awarded without a legal basis.
Second example
Another case involved a 2024 DPA tender to purchase rocket artillery ammunition worth hundreds of millions of dollars.
Three companies submitted bids. The first said it could supply the rockets for the equivalent of about US$4,200 each. Another asked for US$4,600 per rocket, while the third quoted US$5,100.
All of the rockets were identical – manufactured at the same factory by the same company in Türkiye – and the only difference was the price. The Turkish manufacturer, Arca Defense, offered the lowest price through a direct sale from its factory.
However, the contract was awarded to the company that submitted the highest bid – a subsidiary of the Czechoslovak Group, a major Czech holding company. Rather than buying directly from the manufacturer, the government paid the Czech company to act as an intermediary.
The decision added around US$130 million to Ukraine's bill for the rockets. The reports said auditors found no justification for the decision.
Despite the auditors' concerns, Ukraine considered another deal with the company, this time to replace its stock of Kalashnikov rifles with a Czech-designed NATO-calibre model. No agreement has been reported as having been concluded.
Third example
Also in 2024, the DPA sought to purchase Soviet-designed rockets from a Serbian manufacturer. Given Serbia's pro-Russian policies, Ukraine used a chain of intermediaries to obtain the rockets.
The government awarded the contract to Spetstechnoexport, a Ukrainian state-owned arms intermediary with a history of failing to fulfil contracts.
Spetstechnoexport also lacked a Serbian export licence for the rockets. Instead, the company provided a "letter of guarantee" from Ukraine's Defence Intelligence, auditors found.
The company then subcontracted the deal to US arms company Regulus. Rustem Umierov, Ukraine's defence minister at the time, wanted to remove intermediaries from Ukraine's wartime arms procurement.
He asked Regulus to negotiate directly with the state procurement agency, effectively cutting Spetstechnoexport out of the deal. The agreement subsequently fell through.
As a result, the Ukrainian government sued Spetstechnoexport to recover late-payment penalties and interest. Spetstechnoexport, in turn, sought money from Regulus.
Background: In May, the DPA contracted a record quantity of long-range 155mm artillery rounds, with competition helping to save 16% of the initial amount.
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