The New York Times: Ukraine lost about €1 billion of its military budget in 2024 due to corruption

The New York Times has published a report on large-scale corruption and mismanagement of procurement at Ukraine’s Ministry of Defense, based on data from Ukrainian auditing services.

According to the outlet, Ukraine lost about €1 billion of its military budget in 2024 alone due to fraud and embezzlement, which, in the NYT’s words, “go unpunished and are rewarded with new weapons contracts.”

According to government audit reports, seven of Ukraine’s ten largest military contractors received new orders despite open criminal investigations into fraud, failure to fulfill previously concluded deals, or the arrest of their executives on corruption charges. Auditors identified 18 companies that signed deals despite having failed to fulfill previous agreements. Six of those companies had not fulfilled a single contract.

About €129 million of the total losses came from overpayments for weapons due to the disregarding of lower-priced offers. As an example, the NYT cites a Defense Procurement Agency tender for reactive artillery worth hundreds of millions of dollars. Three companies participated with different prices for the same Turkish-made rocket: about €4,000, about €4,000, and about €4,000 per unit respectively — based on the original figures of $4,200, $4,600, and $5,100. All the rockets are manufactured at a single factory by one company in Turkey. Turkish manufacturer Arca Defense offered the lowest price, but auditors found that the contract went to the bidder who had requested the highest price — a subsidiary of the Czech holding company Czechoslovak Group. The budget ultimately lost about €129 million.

“The rocket contract was one of many Ukrainian deals that helped turn Czechoslovak Group into a global defense giant. The company went public, turning its 33-year-old majority owner Michal Strnad into the wealthiest arms maker on the Forbes billionaires list,” the outlet writes.

A separate episode concerns the delivery of defective mortar shells to Ukraine’s Armed Forces in 2024. After they were discovered, the head of the supplying enterprise, Leonid Shiman, was arrested. However, as follows from government inspection reports obtained by the NYT, the Defense Procurement Agency continued to sign new contracts with Shiman’s factory even after officials had recorded the receipt of faulty weapons.

Another example in the report involves the purchase of Soviet-era rockets from Serbia through a chain of intermediaries. The government signed a contract with the Ukrainian state company Spetstekhnoeksport, which, according to auditors, had a history of failing to fulfill contracts and whose executives were suspected of embezzlement and money laundering. The deal began to fall apart, and Spetstekhnoeksport became the agency’s largest debtor.

American anti-corruption expert James Wasserstrom commented on the situation as follows:

“In Ukraine, they will steal anything that isn’t nailed down. It’s a long-standing tradition.”

The report also mentions former Defense Minister Mykhailo Fedorov. According to the NYT, he attempted to reform the procurement system, but defense contractors forced him to resign. After his dismissal, Fedorov stated that corruption was flourishing.