Ukrainian troubled defense kingdom. What does Reznikov leave to Umerov?

Ukrainian troubled defense kingdom. What does Reznikov leave to Umerov?

Troubled defense kingdom or the Ministry of Defence of Ukraine. What does former minister Reznikov leave to the newly appointed Umerov? Censor.net investigates.

On Wednesday, the Verkhovna Rada appointed a new defense minister, Rustem Umerov. After scandals with eggs at 17 and jackets at 29, the president fired Oleksiy Reznikov, although a few weeks ago we were sure he would work by the New Year. And only then will he go to the UK as an ambassador.

Umerov, 41, comes from a respected Crimean Tatar family. In 2006, Umerov became an adviser to Mustafa Dzhemilev, the first head of the Mejlis. He owes to Dzhemilev his high connections in both Turkey and the USA.

Since 2014, Umerov has been involved in returning Ukrainian political prisoners from the Russian Federation. In particular, Akhtem Chiygoz and Ilma Umerov were released with his participation. He was also involved in returning prisoners from Azovstal. He was part of the Ukrainian negotiating delegation in Gomel after the full-scale invasion.

In 2019, Umerov was elected deputy from the Holos party. And in September 2022, he became the head of the State Property Fund. During that period, he became close to the head of the President's Office, Andriy Yermak. In an interview with UP, Umerov explained that it was because of his work in the Crimean sector and their cooperation began at the stage of preparations for President Zelensky’s visit to Turkey.

However, there’s another version among the interlocutors of Censor.NET. The rapprochement between Umerov and Bankova began at the stage of the split of the Holos faction, when the President's Office needed control over those deputies to have a majority in the Verkhovna Rada.

“At that time, Umerov was probably the only one between the two warring groups and he was also a communicator with Bankova,” says an interlocutor in the parliament. According to him, over time, the faction began to receive signals that Umerov should become the head of the faction or the party.

Umerov worked at SPF for a year. Vitaly Shabunin mentions UAH 3.8 billion in income from the sale of enterprises among his achievements; de-shadowing of 700,000 hectares of agricultural lands and preparation for their lease via Prozorro; 30 internal audits, according to which the Fund found losses at UAH 2.3 billion; and the Defense Forces received 600,000 square meters of real estate.

But does this mean that Umerov will be a strong and independent defense minister?

Rumors about the change of the Defense Minister circulated for months. In July, it was already actively discussed in the ministry itself. During that time, Kyrylo Budanov (yes, again), Minister for Strategic Industries Oleksandr Kamyshyn, and Minister of Infrastructure Oleksandr Kubrakov were named as Reznikov’s possible successors.

“And now you can judge for yourself: Kubrakov’s and Budanov’s main condition was to come with their team. If they did not pass, then such an offer didn’t suit Bankova. I don’t know whether Kamyshyn spoke about his team. But I’ve heard that Umerov is coming without a team. Now you can judge about independence,” said the newspaper's interlocutor.

On Wednesday, there were rumors at the Ministry of Defense that the minister was coming without a team and that no one would be fired.

“But if they say so, they can fire everyone. In our case, except for two deputies,” says the newspaper's interlocutor.

What will Umerov inherit from Reznikov? A ministry with a budget equal to the country’s budget. And a ministry with 33 billion in receivables.

According to the Ministry of Finance’s response to a request of the Anti-CorruptionAction Center

However, in an interview with Ukrinform, Reznikov said that only 2.7% of the ministry’s receivables were problematic. 

Also, according to him, the Defense Ministry has “live receivables” on a monthly basis. It’s about contracts that provide for deliveries in 2024, 2025.

Such agreements are for long-term programs, he said. “If they weren't paid now, they wouldn't be able to work, because it’s a missile program, an anti-missile program. These are our reputable companies, like Luch, for example, which makes Neptune complexes,” the defense minister said.

What the minister did not say was that part of the receivables ceased to be problematic only because additional agreements postponed the deadlines for the contracts. And in most cases it is about arms deliveries.

Weapons and wars around them. 

The most difficult topic, and here, despite a number of publications about abuses, there’ve been no scandals like those with eggs, because here you cannot compare prices in a supermarket. But one of the problems is the price at which these weapons are purchased.

It should be highlighted that Ukraine entered a full-scale war with almost empty ammunition depots. And since February 24, we’ve been in need of everything in the world. So we began to buy weapons at any price. Throughout 2022, we bought all possible kinds of weapons, looking for them both in friendly and not very friendly countries. 

If weapons had to be obtained from Bulgaria, to which Belarus and Russia had forbidden to supply weaponry, then the Czech Republic and Poland were involved. If a country was more difficult, the UK and the United States were involved.

Having emptied the ammunition depots, Ukraine finally began contracting production. The fact that ammunition depots exploded several times in Bulgaria is not just a production problem. It’s more about Russian sabotage.

But there are other problems too.

“I think the Bulgarians will soon buy not just islands in the ocean, but Australia as well,” says one Defense Ministry leader about the purchase of weapons. However, there’s a nuance.

Ukraine’s own special importers also ‘heated up’ weapon prices to a large extent.

As we know, at the beginning of the war, the Defense Ministry took over the three largest special arms exporters - Ukrspecexport, Spetstechnoexport and Progress - which became special importers. They were joined by a dozen companies, including foreign companies and “Ukrainian Armor.”

According to the materials available to the author, in May 2022, the Ukrspecexport state-owned enterprise concluded contracts for the delivery of 122 mm HEI rounds at € 727 per piece, on the same day 2 more contracts for 122 mm full-charge HEI rounds for  D-30 (2C1) howitzers for € 1,080 and € 1,090 per piece. With delivery dates of late 2022 - early 2023, these contracts were not fulfilled on time. 

Whereas Spetstechnoexport concluded a contract for a similar position on April 26, 2022 with a price per piece of only € 683 and fulfilled the order by 100%.

On April 27, 2022, Progress concluded a contract for 122 mm full-charge HEI rounds for D-30 howitzers at a price of € 1,195 per piece. And only recently it fulfilled the contract, having taken over the contract of a Polish intermediary, as  UP wrote last week.

In April 2022, “Ukrainian Armor” supplied 60 mm mortar rounds at a price of € 76 (2 contracts). Spetstechnoexport received contracts with a price of € 110 per piece, and Ukrspeceksport - € 104. And, while UAE fulfilled 1 contract by 100%, the other by 30%, Spetstechnoexport - by 100%, but Ukrspecexport did not.

On March 8, 2022, the USE concluded a contract for the supply of 82 HEI mortar mines at a price of € 112.3. The US Regulus supplied them at 86.8 and “Ukrainian Armor” at € 100. All three contracts have been fulfilled.

Already in July, Ukrspetsexport contracted a similar round at - € 125, while a similar one at “Ukrainian Armor” cost € 120. But Ukrspecexport bought one mine at € 159.50 already in August. The contracts have not been fulfilled.

The above figures show that by the fall of 2022, Ukrainian state-owned suppliers themselves had made manufacturers raise prices.

As a result, a year ago Defense Minister Reznikov was forced to fire  the head of Ukrspecexport, Vadym Nozdrya, and the director of Spetstechnoexport, Yevhen Larin.

In addition, in August 2022, Spetstechnoexport became subordinate to GUR. Consequently, in fact, control over the flows was divided between Andriy Yermak’s people and GUR.

However, this did not improve the situation with prices. Only in autumn the Defense Ministry began to check more carefully if suppliers did not contract the same batch at the same factory.

A week ago, Ukrayinska Pravda published an article in which Roman Romaniuk writes about the Polish company Alfa the Defense Ministry concluded 12 agreements with, some of which are being challenged through international arbitration. Since the company had 1.7 billion of accounts receivable to the Defense Ministry.

According to journalists, Progress also purchased shells through the same company.

For example, the Polish company was to supply 122-mm full-charge rounds for D-30/2C1 howitzers at € 760, while Progress was to supply the same munitions (mentioned above) at € 1,195, with a margin of € 435 or plus 57% per round contracted, in fact, from the same company with a difference of five days.

As a result, according to the journalists, the Alfa contract was fulfilled by 10%, while Progress recently fulfilled the order, though with delays. In Progress, cooperation with Alfa is still supervised by Oleksandr Myronyuk, the former deputy of defense minister Taran. He is known to Ukrainians (and not only - the story also appeared on French television) for the scandalous search in the criminal case on the purchase of low-quality bulletproof vests, during which 17 million hryvnias, as well as € 400,000 and $100,000 were seized from Myronyuk. Then the seizure was lifted from this money, because it was allegedly the property of an 86-year-old granny, whose FOP is linked to sniper rifle manufacturers.

While the law enforcers are studying how the money was withdrawn via Alfa, other strange companies appeared in the Defense Ministry’s procurement. For example, last November, the company Lviv Arsenal appeared, which received UAH 1.4 billion for supplying a large batch of 120 mm and 82 mm mortar rounds, but had long delayed the contract and did not deliver a single mine to the AFU.

The Defense Ministry concluded a contract in November 2022 and in December suddenly found out that Lviv Arsenal had an export license from a supplier company from an EU country but that country had no mines.

In fact, the procurement situation did not improve after Larin and Nozdrya had been dismissed. And it can hardly be justified by the fact that the Defense Ministry is ready to buy weapons at any price.

And the Minister of Finance Serhiy Marchenko is right in his position, as quoted by UP:

“Marchenko even had a discussion with Reznikov. He asked: if you had an opportunity to buy shells at one hryvnia or three, which would you buy? Lyosha replied: “Both - I need everything that is on the market.” And Marchenko said that then he’d have to buy all shells at three because the market would sell at a higher price.”

And it happened as Marchenko predicted.

In the summer, the Cabinet of Ministers approved the procedure for financing the Agency for the purchase of weapons, and the Minister of Defense approved the order on its work. In Reznikov's concept, this Agency should eventually replace special importers - state and private - and purchase weapons directly. But it is not clear how transparently and evenly the Agency, headed by Volodymyr Pikuzo, will prove the need to all suppliers, and whether or not it will follow the principle that the price is not the main thing. The main thing is commission interest.

It is not known at all whether the second Agency, already headed by Arsen Zhumadilov, and which is supposed to carry out material and food purchases, will be launched by the New Year. But there will be no fewer problems in its work.

As a result of the egg scandal, the ministry, under public pressure, was forced to abandon direct food procurement contracts, return the bidding to Prozorro, and limit the prices of products in the catalog. 

Food, catalog and bones.

As a result of bidding on Prozorro, almost 5 billion hryvnias were saved on the purchase of food. But they were won by the same companies that had previously received direct contracts. Moreover, for some lots, their behavior resembled a conspiracy, when the company that won 7 lots suddenly forgot to submit the correct documents for another one. 

And yet, access to Prozorro is not a panacea. Because the supplier companies decided to recover their margin losses at the expense of quality. So, recently the author received a complaint from the soldiers of one of the brigades that canned meat supplied under the new contracts not only consists of a third of veins and bones, but also stinks. The Defense Ministry conducted an inspection and rejected this product. How many more cases are there that we don’t know about?

For example, military personnel undergoing retraining at the Academy of Ground Forces at one of the training grounds complained to Censor.NET that they had to eat porridge with beetroot for months.

Although processed cheese spread and canned meat were on their menu, they had to buy these products at a local shop. 

"There were several checks, during which the appearance was created that everything was fine. And then everything was as usual," says one of the servicemen.

At the same time, censor.NET received a photo of the Academy cadets' breakfast, and it looks pretty decent. 

We have been assured that they wil deal with the mentioned situation. 

During this time, the author has more than once heard stories about changed and empty invoices, which make it possible to steal at the level of suppliers and units. And thus more funds can be withdrawn than saved through Prozorro. 

And if Umerov is going to digitize something, he should start with electronic document management. Otherwise, when asked how many eggs at 17 were brought to the units, he will hear: "They will count this for you only in a year." By the way, the issue of electronic document management was one of the main conditions for retail suppliers to participate in tenders. 

What is included in a daily ration for servicemen of some units? Canned tomato, drinking water, canned meat with pasta, tea, bread, sugar, condensed milk, hard cheese, ham. Vegetable salad, buckwheat soup, canned meat with corn porridge, bread, compote, sugar, cookies, spices, onion, kiwi.

 If someone still considers the product catalog with 409 items to be corrupt, then the problem is not in it. In order to somehow dilute the pool of companies that today supply food products for the Ministry of Defense, one can try to tender separately not only for water, but also for bread, cereals, coffee, sugar... 

Already now, the members of Defence Intelligence of the Defense Ministry have managed to make sure that the suppliers do not transport the products to the front by themselves, this is done by subcontractors. And even after the reform of the former minister Anatolii Hrytsenko, the Defense Ministry still has warehouses where all this can be stored.

Jackets, specifications and quality. The second biggest scandal in the Defense Ministry should not have been about whether summer jackets were bought instead of winter jackets. No. It should have been about something else. And it is worth emphasizing something else in this story. 

As you know, according to the examination conducted by the Kyiv Research Institute of Forensic Expertise, the purchased jackets met neither the specifications approved by the Defense Ministry nor the technical parameters specified in the contract, in particular the density. 

Last year, foreign manufacturers were allowed not to comply with the technical specifications. Therefore, the document cited by the Anti-Corruption Action Center concerned everyone, not just the Turkish supplier. Thisdoes not remove the issue of its choice. 

But there is another nuance. Since last year, the 375th order of the ministry, which regulated the assessment of the quality of clothing, has become invalid.That is, even now the product is accepted by touch. And if the order is not resumed, all this will continue. 

According to the results of communication with textile manufacturers, the author can assume that since the methods of checking points were not specified in the contract, the check was done on its own, which allowed using a fabric three times cheaper than that specified by the Defense Ministry.

Another nuance - at the time of the conclusion of the scandalous contracts for jackets, the 169th resolution of the Cabinet of Ministers was in force, which stipulated that the procedure for procuring and contracting is the exclusive right of the customer. That is, he had the right to conclude direct contracts and not care that the price was the lowest. 

But at the same time, the 335th decree was in force for the Ukrainian manufacturers, which did not allow themto make a profit. 

The import of Turkish jackets from a "Turkish" company brought 0 hryvnias into the Ukrainian budget, whereasthe budget received 54 million hryvnias from the Ukrainian company for the supplied 100,000 units at a product price of 2,575 hryvnias. And even with a contract with a Ukrainian importer of conventional jackets atUAH 2,575, the budget would receive 58.7 million UAH. 

This year clothing is purchased through Prozorro. But since the financing is not the best, a situation may arise when jackets will be purchased again out of "urgent need" in Turkey or in China through a Bulgarian intermediary.

By the way, purchasing  out of urgent need is another opportunity that can easily be used to have one’s own manufacturer. Without Prozorro. Imagine you have contracts, let's say, for olive oil, and they are not fulfilled in the first half of the year. Absolutely. Due to force majeure circumstances. And then you buy it out of urgent need. Without checking the companies. Because you need it “for yesterday.” And you have a war. 

And a little more about the specifications. But not for jackets - for shoes. Up to 10 companies took part in this year's food and clothing tenders, whereas only one company (“Talan”) took part in the winter footwear tenders. And there is only one reason for this - only this company’ sproducts can meet the established specifications forsole. The only competitor - "Valtext" - wanted to tender for at least one lot, but failed due to the specifications. 

There are two versions of explanations here - "Talan" has been investing in production and its improvement for years, so it is a monopolist. The second version is that the specifications were designed for this company.

In fact, Ukraine does not have the capacity to develop its own sample models and then give them to the manufacturer. Therefore, as a rule, a better model is taken as a sample. And then it even creates a monopoly.

This is far from a complete list of problems that Umerov will inherit. This is without mentioning the scandals surrounding drones, the dubious use of the Ministry of Defense’s property and renting it out, the low salaries of employees in the departments, the inexplicable constant buzzing of suppliers on the territory of the departments, and even the absence of an extra chair on the passageway for a wounded military man who is waiting for his documents.

Tetiana Nikolayenko, Censor.NET

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