Ukraine Lost $1.2 Billion Due to Problems with Defense Procurement — NYT
In 2024, Ukraine may have lost approximately $1.2 billion due to fraud, embezzlement, and mismanagement in the area of defense procurement. According to The New York Times, this is evidenced by the results of government audits of contracts in the defense-industrial complex.
In an article titled “In Ukraine, Fraud and Embezzlement Are Rewarded with New Arms Contracts,” the NYT analyzed audits conducted by the State Audit Service and the Ministry of Defense’s internal audit unit, as well as court documents that came into the newspaper’s possession.
As one example, the NYT cites the case of the Pavlohrad Chemical Plant, which supplied the Ukrainian military with thousands of defective mortar shells. According to court documents, the plant sold 233,000 defective shells to the army, some of which had problems with their fuses or propellant charges.
The plant’s director, Leonid Shiman, was arrested in April 2025 and charged with fraud amounting to approximately $68 million. In August, he was sentenced to five years in prison in a separate case involving the organization of a scheme to sell explosives at inflated prices. At the same time, his attorney stated that Shyman intends to appeal the verdict and denies guilt in the case involving mortar rounds.
According to audit reports, officials were aware of problems with the plant’s products, yet the Defense Procurement Agency (DPA) continued to award new contracts to the company. In particular, the factory received an order to supply nearly all of the 122-mm artillery shells for the Ukrainian military in 2025.
Auditors also found that seven of Ukraine’s ten largest military contractors received new orders despite ongoing criminal investigations, failure to fulfill previous contracts, or the arrest of executives on corruption charges.
Government audits covering 2024 and 2025 showed that in 2024 alone, Ukraine lost approximately $1.2 billion due to fraud, embezzlement, and mismanagement. These figures were not made public because the documents are classified.
In particular, about $126 million was lost due to the rejection of cheaper bids and overpayments for weapons. In another case, companies are in litigation over at least $100 million in advance payments for a contract that ultimately fell through.
Auditors identified 18 companies that entered into new agreements despite failing to fulfill previous commitments. Six of them failed to fulfill any contracts at all.
Separately, the NYT highlights the procurement of Turkish-made artillery rockets. Three companies participated in the 2024 tender, offering prices of approximately $4,200, $4,600, and $5,100 per rocket.
All the missiles were manufactured at a single Turkish plant. The lowest price was offered by the direct manufacturer, Arca Defense, but the contract was awarded to a subsidiary of the Czech Czechoslovak Group, which acted as an intermediary.
According to the NYT’s estimate, choosing the most expensive bid increased Ukraine’s costs by approximately $130 million. Auditors found no justification for this decision, and previous audits had recommended avoiding purchases through intermediaries.
Another example involves the purchase of Soviet-style missiles from a Serbian manufacturer. Due to Serbia’s stance toward Russia, Ukraine had to use a chain of intermediaries.
The contract was signed with the state-owned company “Spetstekhnoexport.” According to the auditors, the company had a history of unfulfilled contracts, and its former executives were under investigation for possible embezzlement and money laundering. Furthermore, the company did not have a Serbian export license for the missiles.
Instead of a license, “Spetstekhnoexport” provided a “letter of guarantee” from Ukrainian military intelligence. The auditors noted that this preferential treatment had no legal basis and occurred despite the company’s previous failure to fulfill its obligations.
Following this, “Spetstekhnoexport” entered into a subcontract with the American company Regulus Global. This agreement was one of several between the companies totaling $1.7 billion.
Regulus Global, led by former Merrill Lynch stockbroker William Somerindike Jr., already had experience supplying weapons to the Ukrainian army, the article states. However, the deal to supply missiles began to fall apart.
Somerindike stated that then-Defense Minister Rustem Umerov sought to eliminate intermediaries from the arms production business. He asked Regulus to deal directly with the state procurement agency, effectively removing Spetstechnos Export from the process.
As a result, the deal fell through, and by early 2025, “Spetstekhnoexport” had become the procurement agency’s largest debtor, with more unfulfilled contracts than any other supplier, the auditors found.
Consequently, the Ukrainian government filed a lawsuit against “Spetstekhnoexport,” demanding payment of penalties for overdue fines and interest. In response, “Spetstekhnoexport” made financial claims against Regulus.
Somerdyke told the NYT that his company had not committed any violations and had simply “been caught in the crossfire” during the reorganization of Ukraine’s defense procurement system.
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