In 2024, Ukraine lost approximately USD 1.2 billion due to fraud, embezzlement, and mismanagement in the defense procurement system. At the same time, government contracts were awarded to companies that were already under scrutiny for failing to fulfill obligations, overpricing, or criminal proceedings. The New York Times reports on this.

According to the publication, these findings are contained in confidential audits conducted by the State Audit Service and the internal audit unit of the Ukrainian Ministry of Defense, covering the years 2024 and 2025.

The NYT cites the case of the Pavlohrad Chemical Plant as one of the most telling examples. In 2024, the Ukrainian military began receiving thousands of defective mortar rounds. Some of the munitions failed to explode upon firing, while others did not even leave the mortar tubes. Subsequently, the plant’s director, Leonid Shyman, was arrested and charged with corruption offenses. In August, he was sentenced to five years in prison for organizing a scheme to sell explosives at inflated prices.

At the same time, as the NYT notes, citing government audit documents, the Defense Procurement Agency continued to award new contracts to the plant even after the product quality issues became known. According to the auditors, the company initially claimed it lacked the necessary production capacity to fulfill the order but later revised its capacity information without explanation. The auditors found no inspections that would have confirmed the plant’s ability to fulfill the contract.

The situation did not change even after the discovery of defective ammunition. According to the audit findings, the Defense Procurement Agency failed to draw the appropriate conclusions and, on the contrary, awarded the company new orders. Specifically, the plant received a contract to supply nearly all of the 122-mm artillery shells for the Ukrainian Army in 2025.

In total, the auditors identified 18 companies that received new contracts despite failing to fulfill previous agreements. Six of them, according to the audits, failed to fulfill a single contract.

At the same time, seven of the ten largest Ukrainian military contractors received new government orders despite pending criminal investigations, failure to fulfill previous agreements, or the arrest of executives in corruption cases.

Internal government audits indicate that in 2024 alone, Ukraine lost approximately USD 1.2 billion due to fraud, embezzlement, and mismanagement in the area of defense procurement.

In particular, approximately USD 126 million was lost due to the disregard of more favorable bids and overpayments for weapons.

In another case, companies are still in litigation over at least USD 100 million in advance payments for a contract that was ultimately not fulfilled.

Separately, the NYT describes the procurement of Turkish-made artillery rockets. In 2024, the Defense Procurement Agency received three bids. One company was willing to supply the rockets for approximately USD 4,200 per unit, a second for USD 4,600, and a third offered a price of about USD 5,100.

At the same time, all the missiles were identical—they were manufactured by the same company at the same plant in Turkey.

The lowest price was offered by the Turkish company Arca Defense, which, according to the auditors’ assessment, made it possible to purchase ammunition directly from the manufacturer.

However, the contract was ultimately awarded to the company that offered the highest price—a subsidiary of the Czech defense holding company Czechoslovak Group.

The auditors found no justification for this decision. According to their findings, choosing an intermediary instead of direct procurement could have increased Ukraine’s costs by approximately USD 130 million.

Another case involves the state-owned company SpetsTechnoExport. In 2024, SpetsTechnoExport attempted to purchase Soviet-style missiles from a Serbian manufacturer. Due to Serbia’s policy, which did not facilitate direct arms deliveries to Ukraine, intermediaries were used in the arrangement.

The contract was signed with SpetsTechnoExport. According to the auditors, the company already had a history of failing to fulfill contracts, and its former executives were suspected of embezzlement and money laundering.

Furthermore, SpetsTechnoExport did not have a Serbian export license for the supply of missiles. Instead, the company provided a letter of guarantee from Ukrainian military intelligence. The auditors believed that such preferential treatment lacked proper legal justification.

Subsequently, SpetsTechnoExport entered into a subcontract with the American company Regulus Global. The total value of several contracts between the companies amounted to approximately USD 1.7 billion.

However, the missile deal ultimately fell through.

According to Regulus Global founder and CEO William Somerindike Jr., then-Defense Minister Rustem Umerov sought to remove intermediaries from the defense procurement system and proposed that the company work directly with the state procurement agency.

As a result, SpetsTechnoExport was effectively excluded from the deal.

By early 2025, the state-owned company had become the largest debtor to the Defense Procurement Agency. Auditors found that it had more unfulfilled contracts than any other supplier.

The Ukrainian government filed a lawsuit seeking to collect fines, penalties, and late fees from SpetsTechnoExport.  In response, the company filed financial claims against Regulus Global.

William Somerendijk Jr.  denied any wrongdoing on the part of his company and stated that Regulus Global found itself “caught in the crossfire” during the restructuring of Ukraine’s defense procurement system.

The NYT emphasizes that the results of government audits point to systemic problems in the management of Ukraine’s defense procurement. According to the auditors, warning signs were often ignored, and accountability for overpricing or breach of contract was frequently insufficient.

Recall that the Special Anti-Corruption Prosecutor’s Office (SAPO) acknowledged that corruption in Ukraine is not decreasing, and the state lacks the political will to combat it.

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