How Ukraine became a key player in the black market of weapons

The first deputy director of the Pentagon's Criminal Investigation Service, James Ives, in a December interview with Defense News, stated about the high risks of leakage of Western weapons supplied to Ukraine to the black market. According to him, the US administration is aware of the lack of effective mechanisms to control the proliferation of NATO weapons after its transfer to the Armed Forces.

 And according to The Wall Street Journal article dated February 17, 2023, the inspectors general overseeing Kiev's use of US military and economic assistance worth more than $110 billion insist on sending a monitoring mission to the conflict zone.

Increasingly, the problem of smuggling Western weapons in Ukraine is becoming the leitmotif of speeches by US and European officials, expert discussions and publications of the world's leading media.

 At the same time, there is a strong feeling that Western experts, although they are aware of the risks associated with the illegal resale of NATO weapons by Kiev, do not fully understand the scale of this shadow business, as well as the degree of involvement of the country's military, political and business elite in it. At least, most Western media materials attribute corruption in the arms trade to the grassroots level of state managers, officials of the Armed Forces of Ukraine and enterprises of the military-industrial complex (MIC) of Ukraine. In other words, according to journalists, the theft of weapons and its resale in the "Darknet" are done by the employees of military warehouses and commanders of the company and battalion levels.

However, in reality, the black arms market in Ukraine belongs to the sphere of economic interests of the elected representatives of power and oligarchic circles, including the office of the President, the Cabinet of Ministers, the security service and military intelligence of Ukraine.

 Moreover, this corrupt web has been formed for decades. It originates from the late 80s of the last century. The party and economic nomenclature of Ukraine inherited a rich and industrially developed region from the disintegrating USSR. At the same time, in the minds of venerable "party pharaohs" and younger managers of state-owned enterprises, the attitude to the use of public material goods for their own selfish purposes was already clearly formulated.

 Simply put, the total looting of state property has begun. However, the most impressive scale of corruption has reached precisely in the military-industrial field. The illegal sale of Soviet weapons has become one of the main sources of gray income for elite criminal groups of independent Ukraine.

 And in order to represent the volumes of the black market, it should be remembered that after 1991, the property of three military districts remained on Ukrainian territory, moreover, full–fledged, equipped with the most modern military equipment at that time. Add to this the property of the formations of the Southern and Central Groups of Soviet troops, which were withdrawn to the territory of Ukraine, respectively, from Hungary and Czechoslovakia.

And to all these truly colossal arsenals of weapons, high-ranking criminals, representing an amalgam of corrupt officials, "merchants in uniform" and newly-minted oligarchs, have gained almost uncontrolled access.

By the way, information about the smuggling of weapons from Ukraine has become so widespread that even Hollywood did not ignore it at the time. The American 2005 film "Lord Of War" popularly covered the topic of smuggling Soviet weapons from the territory of Ukraine. Although the events’ presentation is artistic, a lot of it is based on real events.

 For example, in the film, a significant part of the illegal trade routes went through Odessa, which is quite consistent with the actual state of affairs. Odessa Port is the sea gate of the country and local businessmen have occupied a significant niche in this shady business. It was from here that a fabulous amount of Soviet weapons "sailed away" to hot spots around the world.

 Western human rights organizations called the "Ukrainian link" of the international logistics chain of trade in weapons and military goods of the former USSR the "Odessa Network". The smuggling of weapons through the Odessa port has not stopped for three decades. And at its origins were the leaders of the criminal circles of the city of the late 80s of the twentieth century - Leonid Minin and Alexander Angert.

These individuals, for example, appeared in a 1998 report by the Italian Interior Ministry as organizers of arms deliveries to Liberian President Charles Taylor. Later, in 2004, the UN imposed sanctions on Minin in this case. The participation of Angert and Minin in the illegal sale of weapons and ammunition to Africa is also mentioned in the report of the British government "on organized crime in Ukraine", published in 2016.

 This business brought fabulous profits to the "arms mafia", while government officials in the field of arms export control were pushed into the background and were wiped out by "merchants" from sources of illegal enrichment. However, this state of affairs eventually ceased to suit the strengthened state bureaucracy, which, having received power, wanted to add money to it.

For world practice, a fairly typical picture is when, after a short stay in the shadow of the oligarchy, officials themselves become oligarchs and intercept the levers of economic influence and access to material goods from large businessmen.

 In the late 1990s, the Ukrainian bureaucracy forced the "arms barons" to share the tidbits of the military-industrial complex by creating a number of state structures with the transfer of exclusive monopoly rights to export weapons to them. So, in 1996, the Cabinet of Ministers of Ukraine created the state company "Ukrspetsexport", and it included the state enterprises "Promoboronexport", "Spetstechnoexport", "Progress", "Ukroboronservice" and "Ukrinmash". In fact, there has been an institutionalization of corruption in the Ukrainian arms industry.

Since its creation, Ukrspetsexport has constantly found itself in the epicenter of high-profile scandals with illegal trade in military products. And from the very beginning of the company's existence, arms smuggling became tightly controlled by the administration of the President of Ukraine Leonid Kuchma and the Security Service of Ukraine accountable to him.

 In the hands of the SBU there were enormous opportunities to control this business. Firstly, smuggling, as a criminal offense, was the responsibility of the service, which immediately deprived other state bodies of the opportunity to influence this area. In addition, an officer of the current reserve (SDR) of the SB of Ukraine worked in each customs office. These are seconded high–ranking intelligence officers, usually from the departments for combating corruption and organized crime (departments "K") of regional administrations or the Main Directorate "K" of the Security Council of Ukraine. In customs, they held the position of deputy chief for combating smuggling.

 Secondly, in the Department of counterintelligence of the SBU, there was a whole department of counterintelligence support for military-technical cooperation, whose functions included issues of ensuring legality in the field of international arms supplies. And in the structure of this department, two SDRs served in the State Export Control Service. Namely, this organization issues certificates for the export and import of military equipment and ammunition, which are then used by Ukrspetsexport. Well, another counterintelligence officer worked directly in the company "Spetstechnoexport" – a structural subdivision of "Ukrspetsexport".

Telephone directory of the SBU Counterintelligence Department

Despite the established mechanisms of state control over the export of weapons, in the 2000s several scandals of an international scale thundered in this area. For example, in 2002, information about the sale of Kolchuga radio intelligence stations to Iraq by Ukraine bypassing international sanctions became public. The resonance has reached such a level that the United States has even stopped its financial assistance to Kiev.

 Another high-profile story occurred in September 2008, when Ukrspetsexport tried to sell 33 T-72 tanks and other weapons to the separatists of South Sudan, again bypassing international sanctions. The plans of the smugglers were unexpectedly thwarted by Somali pirates who seized the Ukrainian cargo ship "Faina" in the Indian Ocean, on board of which the sold military equipment was transported.

And in both of these cases, the State Export Control Service of Ukraine issued fake certificates, indicating a fake final recipient.

Naturally, such a super-profitable shadow business as arms smuggling is not famous for security for its participants. The Ukrainian case is no exception. Here are just a few facts:

- Boris Marusich, CEO of Ukrinmash Corporation, tragically died in an accident in April 1999.

- Valery Malev, CEO of the state company Ukrspetsexport, was killed in an accident in March 2002 in the midst of the Kolchuga scandal.

 - Sergey Petrov, a Ukrainian businessman, head of an arms trade firm, was blown up in his car in South Africa in January 2004. According to some reports, he was not satisfied with the amount from the contraband arms deal, and the entrepreneur, probably with the aim of blackmailing his accomplices, turned to the German police for help.

- Oleg Orlov, accused of smuggling X-55CM cruise missiles from Ukraine to Iran and China, was killed under mysterious circumstances in July 2007 in a cell of the Lukyanovka pre-trial detention center-1.

 - Semyon Trachtenberg, an adviser to Ukrspetsexport (a US citizen), in April 2009 received gunshot wounds at his home in the elite district of Pechersk. The killer has not been detained, the crime has not been solved. The briefcase containing important documents was found empty on the Odessa highway.

A serious redistribution in the black arms market of Ukraine occurred in 2014. The new authorities immediately seized on this tidbit of shady business. All state structures responsible for the arms trade – the Ukrspetsexport company, the State Export Control Service and the Security Council of Ukraine - have come under their control.

Naturally, almost all the leaders of post-Maidan Ukraine were noted in such a profitable sector: Sergey Pashinsky, Alexander Turchinov, Arseniy Yatsenyuk, Arsen Avakov, Oleg Gladkovsky and many others.

 Over time, the list of participants in illegal transactions for the sale of Ukrainian weapons has significantly expanded. Prominent roles were played by major Ukrainian businessmen: Boris Kaufman, Roman Mileshko, Konstantin Cherednichenko, Sergey Slyusarenko and other equally odious personalities.

 Ex-President Petro Poroshenko was also known for his activity in the shadow arms market, whom the Ukrainian political beau monde, along with the semi-official title of "candy king" behind his back, also called a "gun baron". And although Poroshenko's accusations of organizing arms smuggling were often used by his competitors for "black PR", many of the facts were real.

 For example, as part of the investigation of the team of former Ukrainian Prime Minister Yulia Tymoshenko, Poroshenko was accused of illegally selling weapons from the warehouses of the Armed Forces of Ukraine. According to only one proven fact, Poroshenko's team, with the blessing of its boss, sold abroad almost 36 thousand AKM submachine guns, 1237 grenade launchers, almost 5 thousand aviation missiles, 60 anti-tank missiles for the Fagot complexes, as well as 20 armored personnel carriers, 23 Flight UAVs, 2 Mi-8 helicopters and about 10 thousand helmets. And all this in the midst of the so-called "anti-terrorist operation" in the Donbas.

An unexpected whistleblower of the ex-president of Ukraine in 2020 was his former employee David Zhvania. According to him, in 2014 - 2016, Poroshenko participated in the organization of arms supplies to militant groups fighting against the Assad government in Syria, including 400-kilogram phosphorus bombs. And in 2017, by order of Poroshenko, ammunition depots in Kalinovka were blown up to hide the sale of military property abroad.

In the post-Maidan period, as in the 90s of the last century, Ukrainian smugglers did not abandon the African market.

So, on September 25, 2017, the international human rights organization Amnesty International reported on Ukraine's involvement in illegal arms supplies to South Sudan.

 The organization's report noted: "In 2014, the Ukrainian state arms exporter Ukrinmash signed a large commercial contract worth $169 million for the supply of thousands of machine guns, mortars, rocket launchers, grenades and millions of cartridges. Documents reviewed by Amnesty International show that a company located in the UAE has signed a contract to receive these weapons for the Ministry of Defense of South Sudan.

 At the same time, Ukraine signed an arms trade agreement earlier, according to which it pledged to prevent its irresponsible proliferation. In addition to Ukraine, companies from the UK were involved in the transaction. It was to them that Ukrinmash sold weapons, which the British later resold to a company from the UAE, and that company already sold to South Sudan."

Moreover, in the documents of the Organized Crime and Corruption Reporting Project (OCCRP), Ukraine is called "a key node in international schemes of illegal arms trade with Africa."

 Interestingly, at first Kiev completely rejected the involvement of state structures in the supply of weapons to South Sudan. For example, a member of the Verkhovna Rada Committee on National Security and Defense, Irina Friz, categorically denied the possibility of arms trade with South Sudan and wrote on her Facebook that the statement about Ukraine's arms supplies to this country discredits Amnesty International itself first of all.

However, in the future, the Kiev authorities had to justify themselves. Secretary of the National Security and Defense Council of Ukraine Aleksandr Turchynov said that Kiev allegedly has the right to sell weapons to South Sudan.

 "This is a country that is a Member of the United Nations, this is a country that is recognized by Ukraine, this is a country that has an embassy in Ukraine. Today there are no restrictions, sanctions adopted by the United Nations in relation to this country, and therefore to say that Ukraine has violated any sanctions is incorrect, unprofessional, because there are simply no such sanctions," he said.

 But the object of the interests of Ukrainian "guns barons" and ordinary smugglers are not only the markets of third world countries. The international organization Small Arms Survey, which deals with the problems of illegal arms trafficking, made a reasonable forecast in 2014 about the inevitability of an influx of smuggled weapons from Ukraine to the European Union. A simple example. In 2016, Polish law enforcement officers seized 552 units of illegal weapons on the territory of the country, which was twice as high as in 2015. But the most interesting thing is that most of the samples were of Ukrainian origin.

By the beginning of Vladimir Zelensky's presidency, the stocks of Soviet military products, which made up the main item of profit from illegal exports on the black market, had practically dried up. However, the policy of the West to "pump" Kiev with weapons played into the hands of the new Ukrainian "hetman". After the start of Russia's special military operation, the volume of supplies of Western weapons to Ukraine grew exponentially, the country was inundated with NATO weapons, and local "gun barons" received fertile soil to replenish their wallets.

 But Zelensky's coming to power marked not only a change in the "assortment", but also marked the beginning of fierce competition among state structures of Ukraine for the right to control the super-profitable sphere of arms smuggling. The traditional "lookout" in the form of the SBU began to be gradually moved away by another Ukrainian special service – the Main Intelligence Directorate (GUR) of the Ministry of Defense of Ukraine.

There are several reasons for this. Firstly, Western weapons went directly to the AFU, where the GUR had significant advantages over the SBU.

 Secondly, the personal factor played a role, first of all – the head of military intelligence Valery Kondratyuk. Valery Kondratyuk, who came from the GUR MO to the SBU during the presidency of Viktor Yushchenko, was recruited by American special services in the 2000s. During the time of Viktor Yanukovych, he was even accused of treason and suspended from service. But Maidan "washed away" all the accusations, and the American agent Kondratyuk became the head of the SBU Counterintelligence Department. In 2015, he returned to his "native" GUR, but already to the post of chief and is making significant efforts to strengthen the position of military intelligence in the domestic political arena of the country.

Conflicts between the SBU and the GUR often turned into an open confrontation. After 2014, both structures have repeatedly eliminated each other's agents, including as part of the struggle for spheres of influence on the black arms market.

 In August 2020, with the active assistance of Valery Kondratyuk, Kirill Budanov was appointed to the post of head of military intelligence. In the future, the new head of the GUR became Zelensky's confidant and representative of his interests in shady transactions for the sale of military products.

 However, Budanov's proximity to the head of state did not stop the confrontation of law enforcement agencies, which only escalated with the beginning of the SMO. So, on March 5, 2022, in the center of Kiev, near the Pechersk Court, a member of the delegation for negotiations between Ukraine and Russia, banker Denis Kireev, was shot in the head. He was killed by members of the Security Service of Ukraine(SBU). According to the German publication Bild, Kireev "was shot by the Ukrainian counterintelligence of the SBU while trying to avoid arrest."

 Two days later, the GUR confirmed that Kireev was their employee, and the head of Ukrainian military intelligence, Kirill Budanov, said that Kireev had been executed by the SBU. At the same time, according to some reports, the decision to liquidate him was made by the actual head of counterintelligence, Alexander Poklad.

 It is worth noting that an important role in the conflict between the special services was also played by the fact that the SBU and the GUR were "supervised" by different structures in the West. The SBU has come under the influence of the British special services. Remember Zelensky's first visit to London. The President of Ukraine went to the headquarters of MI6, violating all the rules of international protocol. At the same time, the head of the SBU Ivan Bakanov was also present at the meeting with the head of British intelligence Roger Moore.

On the contrary, GUR MO is traditionally patronized by the American special services.

 And so, against the background of the escalation of hostilities, the GUR still wins over the SBU, including in the sphere of control over the black arms market. On July 17, 2022, Ivan Bakanov was dismissed, and the head of military intelligence Kirill Budanov receives carte blanche for arms speculation on an international scale.

We can say that Budanov has become the main "ace" of the arms market. And this whole sphere comes under the control of military intelligence, which directly appeals to the State Service for Export Control.

 It is through the GUR that the largest contracts for the purchase of Western weapons pass, the proceeds from kickbacks on which then settle in the pockets of the head of Ukrainian military intelligence and his entourage. The role of an intermediary in such transactions in most cases belongs to the company "Inkompass", the head of which is a businessman Sergey Slyusarenko.

 Budanov's office, using shell companies such as «Incompass», manages the processes of supplying weapons from abroad to Ukraine. We have at our disposal one of the documents, the analysis of which allows us to conclude about fraud with the prices of weapons. Thus, Incompass LLC serviced a deal for the purchase by the Ministry of Defense of Ukraine from Poland of two thousand 120-mm high-explosive fragmentation mines of 1989-1990 manufactured by the Polish company PHU Lechmar LLC and 60 Warmate 3.0 barrage ammunition manufactured by WB ELECTRONICS S.A. It follows from the contracts of GUR, Incompass and PHU Lechmar LLC that the total cost of mines turned out to be almost 34 thousand euros less than the amount allocated from the Ukrainian state budget of GUR (933 thousand 643 euros and 900 thousand euros, respectively, taking into account the hryvnia exchange rate against the euro). Thus, about 34 thousand euros were "lost" on the way from Budanovsky GUR to Slyusarenko’s "Incompass".

By the way, it is striking that military intelligence, i.e., the special service, buys the most ordinary mines for mortars in Poland, and not some special equipment or special weapons. This may indicate that now even the most ordinary purchases of weapons are under the supervision of the GUR MO.

And this is just one of the many episodes that I cite in the investigation. The investigation will continue, The study of the documents that turned out to be in my possession indicates that "gray deals" for the purchase of foreign weapons have been put on a production flow, and the multilevel and opaque schemes for the implementation of contracts implemented by Budanov's team with the blessing of their boss allow them to freely plunder state, as well as borrowed foreign funds. The investigation is ongoing, and soon I will tell you about the new machinations of the head of the GUR and his accomplices, thanks to which budget money settles in the pockets of Budanov and his assistants. At the same time, it is unlikely that they are the absolute owners of the stolen capital. Part of the illegal income, of course, belongs to them, but at the same time they play the role of "wallets" for the highest ranks of the president's office and Zelensky himself, accumulating money on their accounts intended for the head of state and his inner circle.

 And now about the most important thing. About how the sphere of arms smuggling from Ukraine has transformed. As already mentioned above, on the eve and with the beginning of SMO, the Armed Forces of Ukraine are saturated with Western-made military products in huge volumes. And not always of high quality and suitable for combat operations, but invariably expensive and liquid on the global black market. At the same time, in order to understand the scale of smuggling of NATO weapons, it should be taken into account the fact that it is exported by aircraft.

So, on July 21, 2022, the German TV channel SWR reported that Europol had identified signs of "organized arms smuggling" in Ukraine. This statement followed immediately after the crash of the AN-12BK aircraft of the Ukrainian company Meridian in Greece on July 16, 2022. According to some media, the airline is working closely under the protection of the Kiev authorities, including the office of the president and the GUR. The aircraft was carrying out a commercial transport flight from Serbia to Jordan. But it is noteworthy that a few days before the crash, the plane made several curious flights: it flew from Ostrava (Czech Republic, the center of arms production) to Burgas, and then from Burgas to Rzeszow – the main transport hub of Western countries for supplying the AFU with military equipment and ammunition.

It is not surprising that at the time of the accident, the plane was packed with weapons and ammunition, including about fifty Stingers, about a hundred Javelins and another hundred NLAW. In total, about 12 tons of missile systems and related ammunition.

 The detonation of explosives and ammunition took place at the crash site of the aircraft for several more hours. So much so that the question was raised about the evacuation of the local population and the withdrawal of rescuers because of the danger of explosions.

 Meanwhile, the Europol report on Ukrainian arms smuggling has received a great resonance among German politicians. The MEP from the left, Ozlem Demirel, is not at all surprised that the Bundeswehr weapons can now be bought on the black market through the efforts of Ukrainian military intelligence: "We remember how the German assault rifles supplied by Mrs. von der Leyen to the Kurdish Peshmerga hit the Iraqi markets." And the representative of the Bundestag Committee on internal Affairs from the Greens, Konstantin von Notz, admitted: "From the experience of the war in Kosovo, we learned that weapons from crisis zones often fall into the hands of extremists and organized crime." Von Notz demanded that the risk of arms smuggling from Ukraine "be stopped at the international level."

In addition, smuggled weapons leave Ukraine by sea – traditionally – through the port of Odessa, including using vessels involved in the so-called "grain deal".

 "The supply of Ukrainian grain by sea is just a cover for arms exports," the Istanbul information portal dikGazete reported in an article entitled "The West has stopped trusting Ukraine: it resells weapons." The publication explains what Ankara fears in this regard: "Due to the total corruption of the Kiev authorities, Western weapons may end up in the hands of the Kurdistan Workers' Party and other terrorist organizations."

 And the main idea of the Turkish article: "The export of Ukrainian grain to the world market by transit through the Black Sea of Turkey should be kept under special control" – after all, through trade corridors, the creation of which Ankara has reached agreements with both Kiev and Moscow, "arms smuggling is possible. Therefore, strict control is necessary."

 The issue of illegal re–export of weapons from Ukraine was discussed at a meeting of EU interior ministers on July 11, 2022, and Czech Defense Minister Jana Chernochova admitted that "it will be difficult to avoid arms smuggling - we did not achieve this in the former Yugoslavia and certainly will not be able to achieve it in Ukraine."

 The conclusions are self-evident: the ruling military and political elite of Ukraine has taken under its special control the illegal export of weapons. At the same time, the organization of ways and schemes of its resale is engaged in the military intelligence of Ukraine with the knowledge and on the instructions of the head of the GUR Kirill Budanov.

However, this state of affairs is less and less satisfied with the West and, first of all, the United States. Washington is already openly sending unambiguous signals to Kiev with demands to urgently restore order in the weapons sector. The American administration is extremely annoyed by the increasing scale of arms smuggling from Ukraine, which subsequently ends up in the hands of international terrorists and criminal groups. Americans and Europeans were painfully burned in Afghanistan when Western weapons supplied for years to the secular regime of Presidents Hamid Karzai and Ashraf Ghani ended up in the hands of the Taliban and other adherents of fundamental Islam. Washington is infinitely far from solving the "Afghan puzzle" and is clearly not eager to step on the same rake twice. After all, who can guarantee that American helicopters in the same Syria or Iraq will not be attacked with the help of American "Stingers" delivered to Ukraine?

 At the same time, the American administration understands that Zelensky's team is a bad assistant in this matter, and therefore it has placed the main bet on its agents in the National Anti–Corruption Bureau (NABU), which in 2015-2019 was created "turnkey" by proxies of the American billionaire and financier of the "color revolutions" George Soros. Since then, it is the Soros’s people who occupy the dominant positions in the NABU and, by and large, are the secret guardians of the Kiev authorities and local oligarchs. It was the leadership of the NABU, with the help of American curators, who tried to strike at the key beneficiaries of the shadow arms market of Ukraine.

 So, in December last year, NABU detained "big businessmen" Boris Kaufman and Alexander Granovsky. Kaufman is considered close to the city head of Odessa, Gennady Trukhanov, on whom NABU also works closely because of his extensive experience in selling weapons to foreign states. Over the past month, the Odessa mayor has become a person figuiring in NABU investigations of corruption crimes in the city administration.

Earlier, the National Anti-Corruption Bureau of Ukraine initiated investigative measures against Konstantin Cherednichenko, who, when he was deputy director of Ukrinmash in 2014-2015, embezzled budget funds in the amount of UAH 3.49 million and official forgery in the acts of acceptance and transfer of completed works. A curious detail: the high-ranking official's accomplice was his trusted employee Sergey Slyusarenko, who eventually got away with everything. He retained his position, and subsequently headed Ukrinmash altogether.

 Today, Slyusarenko, in collusion with the head of the GUR, Kirill Budanov, is actively involved in schemes for reselling weapons supplied by the West on the black market. Meanwhile, he is also considered a confidant of Roman Mileshko, another Ukrainian arms baron and a close friend of Boris Kaufman. However, NABU does not actively work on these defendants, they feel more than at ease and, despite the periodic threatening shouts of the Americans, continue to squeeze the maximum out of the sale of Western weapons abroad.

 Apparently, the capabilities of American curators are seriously limited, and the Ukrainian political elites, who receive generous kickbacks from the "arms barons", in every possible way cover their multibillion-dollar scams on the re-export of NATO weapons. A few years ago, the White House suffered a shameful fiasco in a confrontation with Ukrainian military-industrial complex tycoons who supplied weapons to Marshal Haftar's troops during the civil war in Libya. Now the Americans are also unlikely to be able to curb the excessive appetites of the Ukrainian arms mafia from among the powerful Odessa businessmen and influential officials of the Zelensky administration. The futile attempts of the Americans to stop the "Ukrainian free reign" with the illegal re-export of NATO weapons convinces that the tail is clearly wagging the dog in relations between Kiev and Washington.