Arms importer controlled by Ukraine's Defence Intelligence owes state over US$19 million

The arms importing company SpetsTechnoExport, which has been under the control of Defence Intelligence of Ukraine (DIU) since 2022, has been concluding arms purchase contracts at inflated prices, has failed to fulfil billion-dollar contracts, and has run up more than UAH 800 million (approx. US$19.3 million) in debts to the state (and that’s only the amount officially recognised by the courts).

Source: an investigation by Ukrainska Pravda, Defence Intelligence goes shopping. How Ukraine is overpaying tens of millions of euros for delayed weapons deliveries

Details: Ukrainska Pravda has obtained a letter from the head of SpetsTechnoExport, Oleksii Petrov, to the deputy minister of defence which revealed a number of problems with arms procurement. In particular, large defence contracts are not always executed on time, and public money is not always repaid when contracts are not fulfilled.

For reference: Ukraine set up the Defence Procurement Agency (DPA) in mid-2022 in line with NATO standards. The DPA was supposed to make arms procurement transparent for Ukraine and prevent large-scale defence theft. It was established under Defence Minister Oleksii Reznikov.  

At the time, NATO recommended liquidating the so-called special importers – companies that used to sell Ukrainian weapons abroad and now buy them for Ukraine.

But the special importers were not liquidated, even though Reznikov had said they had problems in the first year of the full-scale invasion – such as Western partners complaining about these companies' dishonesty.

In mid-2022 one such company, the State Self-Supporting Foreign Trade Enterprise SpetsTechnoExport, was removed from the Defence Ministry's jurisdiction and reassigned to Defence Intelligence of Ukraine at DIU’s request.

Oleksii Petrov was appointed as the head of SpetsTechnoExport in early 2023. Petrov headed the Security Service of Ukraine's Counterintelligence Department from 2017 to 2019. In 2020, after the change of government, he became the head of the Zakarpattia Oblast State Administration. He later headed the list of the president’s Servant of the People party in the elections to Zakarpattia Oblast Council and eventually served as the head of Zakarpattia Oblast Council until the end of 2021.

In August 2024, a year and a half after becoming the director of DIU's special arms importer, Petrov sent a letter to Deputy Defence Minister Dmytro Klymenkov requesting that the company not be blocked, despite its failure to fulfil all its contracts and its mounting debts to the state.

Petrov attributed the company's difficulties to various factors, including "changes in logistics routes", "disruptions in delivery schedules by certain foreign suppliers", "irresponsible companies" with which he had signed contracts, and even "Houthis in the Red Sea".

Ukrainska Pravda has learned from the letter that:

• SpetsTechnoExport has failed to fulfil numerous contracts.
• This has led to the state, represented by the Ministry of Defence, suing its own special importer.
• As of August 2024, SpetsTechnoExport owes the Defence Ministry over UAH 820 million (approx. US$19.9 million) in principal debt and more than UAH 4.5 million (around US$109,000) in court fees paid by the Ministry.

Ukrainska Pravda journalist Mykhailo Tkach has emphasised that these are only the debts that have been recognised by the Ukrainian courts, and the total amount of potential debts is currently unknown and could be significantly higher.

It is also clear from the letter that SpetsTechnoExport has repaid around UAH 9 billion (approx. US$218 million) to the state for weapons that were never delivered to the defence forces.

"This seems to indicate that SpetsTechnoExport undertook to supply essential weapons and received billions of hryvnias from the state for this purpose, but it did not consistently fulfil its obligations, and after time had been wasted waiting for the contracts to be fulfilled, the courts ordered the company to repay some of these billions while our soldiers continued to wait for the weapons," Tkach said.

Ukrainska Pravda sources in the defence sector say the Ukrainian courts are currently considering dozens of claims that the Ministry of Defence has filed against the DIU-controlled company.

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