Billion-Dollar Flows on Weapons: Maryna Bezrukova Is to Be Dismissed and Destroyed by AOZ

Billion-dollar streams on weapons: Marina Bezrukova is to be dismissed and the AOAZ to be destroyed.

The Ministry of Defense plans to liquidate the Defense Procurement Agency and transfer its functions to the State Tail Operator. This idea is now being marketed to the public as a NATO requirement, though in fact it is not, and the talk is that the head of the AOAZ, Marina Bezrukova, turned out to be ungovernable for interested parties.

What really lies behind the reform of agencies, Censor.NET analyzed.

The reform of agencies into one was announced in an interview LB.ua by Defense Minister Rustem Umerov.

"Our strategy is to hold a strategic session and unite all agencies into one according to NATO standards. Some Ukrainian Defence Forces Agency, where purchases, logistics, contracts, measurement, efficiency will be organized according to NATO. We want, in line with NATO strategy, to create separate agencies and unite them, so there will be a vertical of artillery, missiles, drones, etc.," the minister said.

In reality, statements about some NATO demand that some Ministry of Defense representatives are trying to sell are false.

In the recommendations on reforming defense procurement, provided to Ukraine within the Defense Strategic Review, there is indeed mention of creating a single agency. But such a recommendation is given for the period after the end of martial law. At the same time, it is not advised to implement changes during the war so as not to disrupt operating mechanisms. And it is worth recalling that only a full launch of the Defense Procurement Agency took 2 years for the Ministry of Defense, most of which time the AOAZ was just one of the weaponry special exporters. The Agency began functioning fully only from autumn last year.

Moreover, literally this week the author spoke with NATO’s representative in Ukraine, Patrick Turner, and he did not voice any categorical position regarding the agency.

Moreover, just a month ago NATO standards did not prevent the ministry leadership from considering creating a third agency to handle UAV procurement.

And this cannot be dismissed as unfounded rumors (though this is exactly what the deputy minister Dmitro Klimenkov tried to convince the author of a month ago). Because for this Agency, a potential head was even chosen.

And the minister himself, in the same LB.UA interview, acknowledged that creating a third agency was his idea.

"That was my idea. I will explain why. However, in advance — this does not mean we have already made a decision. We have some culture of incivility: as soon as discussions begin, everyone runs and starts passing it on to others," Umerov complained.

Indeed, this jump from three agencies to one provides reason to think that the cause of these actions around AOAZ is not NATO recommendations, but that someone wants to gain control of certain flows.

But to do that, let’s recall how both agencies were actually created. They were created under the leadership of Oleksii Reznikov.

Back in May 2022 Western partners hinted to Defense Minister Reznikov that it is unacceptable for Ukrainian weapon-special exporters to roam in packs at factories and to massively inflate prices for projectiles. After that, the minister fired the heads of two specialized exporters—Ukrspetsexport and Spetstekhnoexport—and announced the launch of two agencies modeled after NATO.

The Defense Weapons Procurement Agency was created first, and for more than a year operated as one of the special exporters, while contracting remained in the hands of the Military-Technical Policy Department. As a result, the media published more than one investigation into abuses in weapons procurement. In addition to scandals with contracts of the Lviv Arsenal and Polish Alfa, members of the public anti-corruption council learned about a substantial price difference permitted when purchasing the same ammunition in one period but from different companies.

For example, in March 2022 Spetstekhnoexport signed a contract for 120 mm mortar rounds at a price of 310 euro per unit. 18 April, Ukrainian Armored Vehicles signed contracts with the Ministry of Defense at prices of 265 euro and 290 euro depending on the factory. Later in April, Ukrspetsexport signed a contract with a Romanian supplier at the price of 303 euro per mortar round 120 mm. But the same Ukrspetsexport, meanwhile, began in April 2022 procuring 120 mm rounds at 515 euro per unit from another, more exotic supplier. And then in June the Ministry of Defense signed import contracts at much higher prices—with the American company Global Ordnance of Mark Morales at 500 dollars, and with Polish Alfa at 450 euro.

How did this happen? In the Ministry of Defense there were constant leaks of information when someone from a supplier submitted an application; it was leaked to a competitor, who quickly negotiated with the plant in Bulgaria, Romania, or elsewhere, and re-contracted the batch for themselves. As a result, such unhealthy competition led to a continuous rise in prices.

Also, European countries often bought the same batches of weapons for international technical assistance at much higher prices than Ukraine.

Since 2023, a special center of MoD and General Staff representatives began to operate, examining proposals from various companies. But this did not solve the problem. At the same meeting they could decide to buy part of ammunition cheaper from one company and part from another, just a couple of dollars more.

The full launch of the AOAZ should have solved this unhealthy competition. In addition, it would be necessary to start contracting Ukrainian-made products from January 2024.

In winter the new leadership of the Ministry of Defense replaced the head of the AOAZ, suspecting Vladimir Pikuza of working for the previous team.

The new head of the Weapons Procurement Agency was Marina Bezrukova, who previously was a buyer at Ukrenergo and received international awards for fighting corruption in energy procurement. Besides Bezrukova, there were other candidates, but they decided not to take this cup. The risks were too high.

Bezrukova agreed. "Maybe in the Defense Ministry leadership they thought she would be weak and controllable, but it turned out to be the opposite," says a source.

Bezrukova first showed character when she demanded Deputy Minister Dmytro Klimenkov's adviser Bohdana Yarova stop coming to her with her advice. She also organized a scandal on Facebook to oust public involvement, but in reality the GARD MO did not allow (except Yarova).

Subsequently, representatives of different special exporters agreed that the Ministry of Defense leadership itself cannot influence Bezrukova. Recently the head of the AOAZ has even begun demanding that Klimenkov formalize all her orders to her in writing.

At the same time Bezrukova has significantly changed the balance in contracting.

For example, contracting Ukrainian products was raised from 0% to 59%. At the same time the share of special exporters in contracting fell from 69% to 18,1%. These figures are enough to show there are many interested parties who want Bezrukova to be eaten.

But there are other nuances. Unlike Arsenal Zhumadilov, who formed the DOT team from his allies, most of whom he brought from Medical Procurement, Bezrukova came into the "swamp of crocodiles" where almost every employee is connected to some influential group (a special exporter).

This led to the best proposals from manufacturers getting lost in the interests of intermediaries.

In the summer Bezrukova strengthened her team with the first head of NABU and former deputy head of the NAPC Artem Sytko.

In the AOAZ they introduced a system where a response to a submitted request must be given within 3 days. This did not stop the leaks at 100%, but it significantly narrows the field for maneuver, the Agency assures.

In addition, the Agency has burned some of the special exporters for forged documents, severed contracts worth billions with them and filed a claim to law enforcement.

As a result, the money that the special exporter wanted to cover previous debts will not be received, because the contracts are terminated. Such actions will not be welcomed.

What the special exporters themselves accuse the Agency of. Here is a consolidated list of complaints gathered from various sources:

- AOAZ contracts directly more expensive than through intermediaries — it feels like they want contracts "at any price." Plus with later delivery times;

- they have overdue contracts of more than 160 billion;

- no hryvnias of compensated fines from external suppliers, unlike internal suppliers;

- in three months not advanced (not started) any contract;

- in three months the last terms of payment under none of the AOAZ contracts were met.

The author turned to AOAZ for a general comment on these claims.

Starting from 160 billion, AOAZ stated that this is not true.

Regarding the accusation that AOAZ takes higher prices directly, the Agency stated:

"We use all opportunities to procure directly from product owners with minimal involvement of intermediaries. In order to "secure" future production capacities, we are forced to consider that manufacturers will account for rising demand and raw material price increases when forming their proposal for future supplies," the Agency said.

"Besides the year of manufacture, the origin country also influences the price. The price of a well-known European manufacturer that provides high quality will, of course, be higher," the Agency noted.

The accusation that there is not a hryvnia of compensated fines from external suppliers, unlike internal suppliers, is also not true.

"As of today, foreign counterparties have paid the Agency 57 249 euros and 10 384 dollars. At the same time, legal proceedings are lengthy, and in courts of different instances there are cases totaling 5,5 million euros and 566 thousand dollars. The amount of enforced decisions and claims against special exporters amounts to more than 3,9 billion UAH. But it should be noted that it is from the side of special exporters that we face the greatest delays in fulfilling state contracts. Today courts are considering cases on recovery of penalties exceeding 2,2 billion UAH," the Agency's reply states.

Regarding domestic producers, the amount of fulfilled decisions and claims is 16 million UAH.

The accusation about advances the Agency also rejects. As does the accusation of non-payment under contracts. For example, one of the special exporters received advances totaling over 2 billion hryvnias in the last three months.

"Recently the Verkhovna Rada adopted a decision to allocate an additional 76 billion hryvnias for the purchase of weapons, and we plan to obtain financial obligations exactly on those state contracts where prompt delivery of critical nomenclature to the front can be ensured," the Agency noted.

The author suspects that the desire to "properly" distribute the 76 billions spurred the "reform" of the AOAZ.

The thing is that a year ago the author already had the chance to observe the chaos 30 of billions that existed between DVTB and the Agency, which at that time was headed by Vladimir Pikuzo. DVTB contracted these funds for its own needs, while Pikuzo contracted essentially on credit for the next year.

As a result, a recent audit of the Agency’s work was conducted. And besides business trips (the Ministry of Defense did not like Bezrukova and Sytnik traveling somewhere), as well as complaints about the procurement of service Hyuindai Tucson for traveling to receptions and business trips for Agency employees, the current leadership is accused that 25% of contracts with budget obligations belong to Spetstekhnoexport. Yet a large portion of these (75%) were concluded under the previous Agency head Pikuzo, not Bezrukova.

But there is a likelihood that Bezrukova is about to be blamed for everything this Saturday.

Even if we take the special exporters’ claims as absolute truth, it is unclear why not replace the Agency head, but to destroy it.

Why destroy? Because already 2 weeks diplomatic missions of European countries are aware that weapon procurement is being handed to DOT. Sources in DOT also confirmed that such an option is being considered, including absorbing an "adequate portion of the AOAZ staff."

That is, DOT is being considered as the base for a new agency, not AOAZ. Although AOAZ has more. Moreover, creating, for example, a so-called "secretariat" takes half a year. And it is not handed over as a mascot.

The weapons market is even more specific than logistical support.

But would DOT have a successful track record, you will say.

Not exactly.

The biggest crisis for DOT currently is the army’s food procurement. In spring, for three weeks, army food supply collapsed due to the war and stale suppliers. Although supply has since leveled out, most old suppliers continue to operate in the market — Atomic Service, Mit Prom as a new facade of the Glinyany group, Contract Pro Derzerv, Yugprod Torg, and the Buzky canning plant tied to the Grinkevich family.

Meanwhile, the failure of many new suppliers was connected to them not being contracted for sub-contractors, who were blackmailed by old suppliers that they would not get their money back.

But that is not all. Even those companies that were suppliers for a short time still cannot receive their money from DOT. Those who supplied bread complain that they ended up at a loss.

"We cannot operate without contact with the chief of production, because we need to have a forecast of supplies, and DOT prohibits this. In addition, part of the product’s price includes a margin to cover other things. But to create it, many go for lower quality. For example, there is currently no chicken at 120 in the catalog. What we can buy is a shell, pumped with water," says one potential supplier.

Next year DOT announced a pilot project in part of the regions where goods will be purchased from designated DOT producers after signaling auctions. In addition, Arsen Zhumadilov’s team launches DOT-chain for electronic document management.

"The thing is that old players who never worked in the open cannot use this, and we also cannot yet assess whether we can implement new software and how to include it in the catalog’s pricing," notes another potential supplier.

This is only about food. And that is enough for DOT to remain only in its niche.

Currently the ministry has two development concepts – pretend that the Agency will be united someday, but the process has begun. Another is to fight Bezrukova. Which path the ministry chooses will become clear tomorrow.

On Friday the MoD gathered G7 representatives and tried to make it look like a misunderstanding, promising to "involve teams from the Ministry of Justice, the Ministry of Foreign Affairs, and our NATO partners in active cooperation in implementing the Evaluation’s recommendations and their practical realization."

At the same time, the MoD plans to fully use the audit against Bezrukova.

Author: Tetyana Nikoledyenko

Source: Censor.NET