Defence Ministry gave Lviv Arsenal company US$36.8 million for mines but did not receive any

Lviv Arsenal company received UAH 1.4 billion (approx. US$36.8 million) from the Defenсe Ministry for the supply of a large batch of 120 mm and 82 mm mortar rounds, but it was long overdue for the contract and did not transfer a single mine to the Armed Forces of Ukraine.

Source: article of Ukrainska Pravda "Empty Lviv Arsenal. How the Ukrainian Armed Forces did not receive a single mine for US$40.3 million"

Details: The Ministry of Defenсe signed a contract with Lviv Arsenal, a little-known company, on 11 November 2022. A few days later, Oleksii Reznikov, Defence Minister of Ukraine, authorised an advance payment under the contract, almost 100% of the transaction amount.

The company stated that it has an export licence in one of the European Union countries. Shortly before signing the contract with the Ministry of Defence of Ukraine, the Cabinet of Ministers added Lviv Arsenal to the official list of so-called special weapons importers.

Deliveries were supposed to start in December 2022 and be fully completed by the end of February 2023, but as of the end of July, the Ministry of Defenсe has not received a single mine under a prepaid contract.

When the first delivery was disrupted in December 2022, the Defenсe Ministry suddenly discovered that Lviv Arsenal had an export licence from a supplier company from one EU country, but there were no mines in this country. They were allegedly stored in warehouses in a third country. But neither Arsenal nor its counterparty received export licences from this third country before they took the money from the Ministry of Defenсe.

Lviv Arsenal has withdrawn more than UAH 400 million (approx. US$10.8million) to its supplier.

Liiev, the signatory of the agreement, said that Lviv Arsenal actually granted an export licence from the supplier country, but that supplies are often organised through intermediaries, and in such circumstances it is difficult for the Ministry of Defence to control the receipt of export documents from the country of manufacture.

"In such payments, the Ministry of Defence of Ukraine can, firstly, control the availability of export documents from the exporting country. And it was a civilised EU country that is a partner of Ukraine. And, secondly, contracts are concluded only with companies defined by the Cabinet of Ministers of Ukraine as having the right to such activities," explained Liiev to Ukrainska Pravda. 

The sources of Ukrainska Pravda in the Cabinet of Ministers could not explain how a little-known company quickly received special importer status in the autumn of 2022.

It is noted that now the Ministry of Defence has secured the seizure of money in Arsenal's accounts, although the decision in the court register has not yet been published.

According to Ukainska Pravda, the company transferred only part of the money to its European counterparty, so almost a billion hryvnias (approx. US$27.2million) remain in Ukraine and are blocked on accounts. This provides tools so these funds are not completely lost, as in dozens of other scandalous contracts.

The police are investigating proceedings under Art. 191.5 of the Criminal Code of Ukraine (misappropriation and embezzlement of property on a huge scale).

At the same time, Lviv Arsenal recently announced that it has finally received export licences and will start deliveries under its contract. 

However, it is unclear how the seizure of the accounts can be lifted and how to authorise the withdrawal of money, as there is little trust in this company.

For reference: Lviv Arsenal is registered at 1 Pratsia Street in Kyiv. Until the autumn of 2022, it did not appear among the major arms suppliers.

The only time the company appeared in the public space before the current situation was when it broke the contract with the main manufacturer of small arms for the Interior Ministry, Fort Enterprise, and for several years sued for UAH 5 million (approx. US$136,012). 

Yurii Zbitniev, the founder of the Lviv Arsenal, became one of the youngest members of the Verkhovna Rada of the Ukrainian Soviet Socialist Republic in 1990. He also participated in creating the Social Democratic Party of Ukraine (United), but later left it.

In 2009, Zbitniev, along with General Oleksandr Skipalskyi, the former chief of Defence Intelligence of Ukraine and Viktor Yushchenko's bodyguard, demanded that Yushchenko reschedule presidential elections because, in their opinion, both the leading candidates, Yanukovych and Tymoshenko threatened the movement in the EU.  

During the Revolution of Dignity, Zbitniev participated in the seizure of the Kyiv City State Administration, and after the victory of the Maidan, his wife, Kyiv journalist Rena Nazarova, became a member of the Kyiv City Council from Vitalii Klitschko's Ukrainian Democratic Alliance for Reform (UDAR) party.

Now Nazarova works in the Office of President Volodymyr Zelenskyy.

Ukrainska Pravda found out that Nazarova and Zbitniev broke up several years ago.

Zbitniev and Nazarova ignored all requests for comments.

Journalists fight on their own frontline. Support Ukrainska Pravda or become our patron!