Ukraine lost around €1 billion on defense procurement in 2024, NYT reports

Ukraine lost around €1 billion in 2024 due to fraud, waste, and mismanagement in defense procurement — according to government audits of defense industry contracts.

This was reported by RBC-Ukraine, citing a New York Times article.

The NYT piece ran under the headline “In Ukraine, Fraud and Waste Are Rewarded With New Weapons Contracts.” It is based on reviews by the State Audit Service and the Ministry of Defense’s internal audit unit, as well as court documents obtained by the publication. The audits cover 2024 and 2025 and have not previously been made public, as the documents are classified.

Defective mines and new contracts

One of the key examples cited by the NYT involves the Pavlohrad Chemical Plant. According to court documents, the enterprise sold the army 233,000 defective mortar rounds, some of which had problems with fuses or propellant charges. The plant’s director, Leonid Shyman, was detained in April 2025 and charged with fraud amounting to approximately €58.5 million. In August he was sentenced to five years in prison in a separate case involving an alleged scheme to sell explosives at inflated prices. Shyman’s lawyer said he intends to appeal the sentence and denies guilt in the mortar round case.

At the same time, according to the audits, officials became aware of problems with the plant’s products, yet the Defense Procurement Agency continued to award the enterprise new contracts. In particular, the plant received orders to supply nearly all 122mm artillery shells for the Ukrainian military in 2025.

Seven of the ten largest contractors — with violations

Auditors found that seven of Ukraine’s ten largest military contractors received new orders despite open criminal proceedings, failure to fulfill previous contracts, or the arrest of their executives on corruption charges. Eighteen companies were identified that signed new agreements while previous ones remained unfulfilled. Six of them had not completed a single contract.

Among the specific losses: approximately €108.3 million was lost due to the rejection of cheaper offers and overpayment for weapons. At least another €86 million is the subject of legal disputes by companies over a contract that ultimately fell through.

Turkish rockets through an intermediary

A separate episode concerns the procurement of Turkish-made artillery rockets. Three companies participated in a 2024 tender, offering prices of approximately €3,600, €3,900, and €4,000 per rocket respectively. All the rockets were manufactured at a single Turkish factory. The lowest price was offered by the direct manufacturer — Arca Defense — but the contract was awarded to a subsidiary of the Czech company Czechoslovak Group, which acted as an intermediary.

According to the NYT’s assessment, choosing the most expensive offer increased Ukraine’s costs by approximately €111.8 million. Auditors found no justification for this decision, and preliminary reviews had recommended avoiding procurement through intermediaries.

Spetstekhnoeksport and a chain of failed deals

Another case involves the procurement of Soviet-era rockets from a Serbian manufacturer. Due to Serbia’s position regarding Russia, Ukraine used a chain of intermediaries. The contract was concluded with the state-owned company Spetstekhnoeksport. According to auditors, it had a history of unfulfilled contracts, and its former executives had been subjects of an investigation into possible embezzlement and money laundering. In addition, the company did not hold a Serbian export license for the rockets — instead, Spetstekhnoeksport provided a “guarantee letter” from Ukrainian military intelligence. Auditors noted that this preferential treatment had no legal basis.

Spetstekhnoeksport subcontracted to the American company Regulus Global. This agreement was one of several between the companies totaling approximately €1.5 billion. Regulus Global is headed by William Sommerendike Jr., a former Merrill Lynch stockbroker, and the company already had experience supplying weapons to the Ukrainian army.

Sommerendike said that then-Defense Minister Rustem Umerov sought to eliminate intermediaries in the arms business and asked Regulus to deal directly with the state procurement agency, effectively removing Spetstekhnoeksport from the process. The deal ultimately fell through, and by early 2025 Spetstekhnoeksport had become the largest debtor to the procurement agency, with more unfulfilled contracts than any other supplier. The Ukrainian government sued the company seeking penalties and interest, while Spetstekhnoeksport in turn filed financial claims against Regulus.

“We did not commit any violations and simply found ourselves caught between two fires during the reorganization of Ukraine’s defense procurement system,” Sommerendike told the NYT.

Previously, one of the manufacturers filed a complaint with the National Anti-Corruption Bureau of Ukraine over the way the Defense Procurement Agency conducted a tender for fiber-optic drones, and the industry as a whole has raised concerns about risks in the defense procurement process.