Ukrainian Firm Caught Over-pricing Parts for Russian-made Armored Vehicles

Executives of  Ukroboronprom subsidiary "Zhytomyr Armor Plant" have been charged with embezzlement  while ordering parts for Russian-made armored vehicles.

The Security Service of Ukraine (SBU) exposed the scam in which the cost of purchase increased by 750,000 hryvnia ($30,173 USD). During searches at the state-owned enterprise and at the places of registration of fictitious firms in the Kyiv region, the SBU seized documentation, equipment and about 400,000 hryvnias ($16092.57 USD), an SBU statement released to Ukrainian media said.

In the spring of 2019, the company announced a tender for the purchase of components for more than 1.5 million hryvnias ($60,000 USD). The winner of the tender of the State Defense Order was a company from the Kyiv region.The terms of competitive bidding were artificially formed to allow the company to win the tender.

"Only two participants were allowed to take part in the tender, both of whom were fictitious. The winning firm and the loser are connected through a third commercial structure and they have a common staff. The SBU has determined that the prices of spare parts were inflated by 2.7-5 times of the regular purchase price," the SBU added.

Certificates for products, in accordance with the terms of the tender, had to meet the US production standards. However, the documents showed signs of falsification. In the information databases the origin of the products is indicated as Russia while the manufacturer is a Middle-Eastern nation. 

This is not the first time that Ukroboronprom has been in the eye of a corruption storm. The son of a close business partner of former President Petro Poroshenko was last year accused of selling smuggled Russian components to Ukrainian defense factories at inflated prices.

Despite increasing reliance on Western military equipment, Ukraine relies on Russian-origin equipment as the bulk of its military hardware. Strained relations with Russian have made it difficult to source parts from the original equipment manufacturers which has given rise to intermediaries of dubious credentials.

Russian origin equipment with Ukrainian Army includes tanks, armored vehciles, ships, fighter jets and transport planes.