This article originally appeared in New Eastern Europe
Ukrinmash, next to Ukroboronservice and Prohres enterprise, is a leading Ukrainian state-owned company dealing with the arms trade, real estate trade, transport services, and other related industries. Arms exports have become a key avenue of development for Ukraine’s arms industry after 1991, mostly because large arsenal, inherited from the Soviet Union, far exceeded the needs of the Ukrainian army and the capabilities of Ukraine’s budget. Ukrinmash has a right to export and import military equipment which the Ukrainian army does not need any longer, and also equipment that has been secured by state secrets.
Ukrinmash was established in the early 1990s. In 1996 it was included, with several other companies, into Ukrspecexport as its subsidiary. The main goal of restructuring was to put Ukraine’s defence industry into international markets. Until then, Ukraine’s arms exports had been – according to the western experts – “incompetent”. Ukrinmash has always been close to the Ministry of Industrial Policy, unlike Ukroboronservice (which has been close to the Ministry of Defence) or Prohres (which has been close to the Foreign Intelligence Service). When Viktor Yanukovych took power, his associates were considering a shutdown of Ukrinmash as an enterprise that was too independent. However, these plans failed and Ukrspecexport as well as its subsidiaries were included into a newly created state-owned Ukroboronprom company, which was aimed at strengthening ties between the Ukrainian and Russian arms industries. This matryoshka-like structure made it difficult to make a proper diagnosis of the company’s activity, especially having in mind that the international arms trade is not very transparent in nature. The practice is that Ukrinmash (and other similar enterprises) operate within the frames of Ukroboronprom and Ukrspecexport. Ukrinmash does not sign contracts on its own but it services transactions of these two companies.
A positive example?
Ukrinmash is rather a positive example on the map of Ukraine’s defence industry. It has interceded in numerous transactions with states such as Russia, Mongolia, China, Sri Lanka and Cuba. In 2013, its revenues were 18.3 million US dollars and its net profits were 2.75 million US dollars. This is a significant achievement in comparison to other Ukrainian arms traders, like Promoboronexport, which do not publish their profits – probably because they do not have any. Ukrinmash co-operates with Kharkiv Morozov Machine Building Design Bureau, a respected actor on the international market of tanks and armoured vehicles. It was involved in negotiations with the Polish company Mista, which is going to create a Polish version of the Ukrainian armoured vehicle Obzor-B. Ukrinmash was also engaged in studies and creation of two advanced solutions in the production of tanks.
Other aspects of Ukrinmash’s operations are highly suspect. Ukrinmash has probably been involved for years in the exporting of illegal arms. However, this is not the main field of the company’s actions, but is more an action undertaken by the Ukrainian state, which has often been trying to sell its arms to the sanctioned countries in spite of the fact that this is a controversial and morally doubtful – although profitable – practice.
Yet in the times of Leonid Kuchma, Ukrinmash co-operated with Libya. Between 2011 and 2013, the company – in spite of the civil war and the UN embargo – decided to sell weapons to this country. In 2011, Military Export Import Company, an Albanian military enterprise, said it had sold ammo to Ukraine, though this was not the case. It was said that the ammo was exported by Ukrinmash in co-operation with an Armenian broker to – officially – the United Arab Emirates. In fact, the weapons had been shipped to Libya. The scandal was revealed as a Ukrinmash Sierra Leone-flagged arms shipment was seized in Greece on its way to Libya.
Since the 1990s, Ukrinmash has been closely co-operating with Syria, one of Russia’s closest allies in the Arab world. Ukraine has been harshly criticised for this by the US. According to Wikileaks, Ukrinmash was looking for new contracts with Syria and Yemen also during Yushchenko’s presidency, but there is no information about whether co-operation with Syria was continued after 2011 when the civil war started.
Between 2006 and 2008, in spite of the UN embargo, Ukrinmash signed three contracts on arms exports to what is now South Sudan, which was still a part of Sudan at that time. Ukrinmash sent T-72 tanks, the BM-21 launch vehicle (Grad), and air-defence systems. The world found out about it in 2008 when Somali pirates seized a Ukrainian ship sailing under the Belize flag carrying 33 tanks on board. Ukrainian officials claimed that ship was heading to Kenya, but these statements were not convincing.
In 2008, the Bosnian ministry of defence sold 100,000 bullets to Ukraine. There are reasonable doubts that Ukrinmash was not a real buyer in that case and the delivery was in fact going to the Democratic Republic of the Congo.
The case of Boris Marusich
Another intriguing thing about Ukrinmash is its management. In the 1990s, the company was managed by Boris Marusich, who died under mysterious circumstances in 1999 in a car accident. This death was perhaps supposed to cover Ukrinmash’s illegal business connections. But it was not the only case like this when Kuchma was in power. Marusich was replaced by Volodymyr Dudko, who had previously worked in the rocket-building company Pivdenmash, where Leonid Kuchma worked as a director. It confirmed the suspicions that the state wanted to take greater control over Ukrinmash.
During Yanukovych’s presidency, Ukrinmash was run by Stanislav Khosh from Sevastopol, who was allegedly an associate of general Sergei Lebedev, the director of Russia’s Foreign Intelligence Service from 2000 to 2007. Under Khosh’s management, Ukrinmash strengthened its co-operation with Russia as the company signed in 2013 an agreement with Russian Avia Export on maintenance of the Mi-17 and Mi-171 helicopters.
After the Revolution of Dignity, Khosh was replaced by Anatoliy Mayboroda, a long-time Ukrainmash worker. However, he was fired in September 2014. Mayboroda tried to present himself as a victim of corrupted informal networks, but he was not an angel either. After the conflict with Russia had begun, Ukrinmash was harshly criticised for selling on an internal market a significant volume of weapons which were supposed to be delivered to the Ukrainian army. Ukrinmash sold 35,900 machine guns; 5,000 surface-to-air missiles; 1,237 grenade launchers; and 60 Fagot anti-tank missile systems. It is unknown who received these weapons – pro-Russian separatists, Ukrainian volunteers, or maybe another country.
Mayboroda’s successor was Leonid Kruchkov, who has been (in)famous for the hostile, sometimes also illegal, takeovers of various companies. Under Kruchkov, the company focused on the import of weapons for the Ukrainian army and other military groups fighting in eastern Ukraine. In November 2014, Ukrinmash signed a contract with French company Thales, but the details remain unknown. In December last year, it signed a contract for the delivery of 25 armoured personnel carriers Saxon with British company Witham Specialist Vehicles. It also started co-operation with several American companies such as the Defense Technology, ATN Corporation and Barrett Firearms.
Some of the above mentioned decisions are, at the very least, doubtful. It appears that the ATN Corporation is only a middleman in this transaction – ordered weapons are in fact being produced in Ukraine and Russia. What is more, some of the ordered weapons are hunting weapons, so it is not entirely clear whether they will be useful on the battlefield. Saxon vehicles were first designed in the 1960s. This deal was particularly profitable for Ukrinmash and Ukroboronprom. A military prosecutor has already started an investigation into it. No need to mention that such wrong-headed investments make the fight against the separatists and the Russian army even more difficult and simply make Ukraine’s defence policy look ridiculous.
For the sake of being understood properly – it is not this article’s goal to participate in the discussion of whether the West should arm Ukraine or not, and it is certainly not a voice against it. However, there is a need to understand that Ukraine, as well as its western partners willing to support Kyiv, must be extremely careful with what to sell and deliver to Ukraine and, most importantly, who is in charge of the arms industry. Otherwise, Ukrainian soldiers would only be able to hunt animals and to enrich their military diet.