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Ukrainian President’s political ally implicated in scandal over murky defense-sector supply chains

Author : Jamestown Foundation

With a month remaining before the presidential election, scheduled for March 31, Ukrainian President Petro Poroshenko found himself caught up in a scandal that could further harm his chances for reelection
21:00, 4 March 2019

Presidential Administration press office

With a month remaining before the presidential election, scheduled for March 31, Ukrainian President Petro Poroshenko found himself caught up in a scandal that could further harm his chances for reelection. A recent investigation by journalists from Nashi Hroshi alleges that one of Poroshenko’s close political allies and business associates was involved in an illegal ring smuggling Russian military parts for the Ukrainian defense industry. The investigation suggests that Ukraine’s military procurement regime is hobbled by deep corruption and evidently remains seriously dependent on products and components produced in Russia. This situation persists despite several years of armed confrontation with Moscow and growing Western military assistance.

On February 25, the investigative reporting outlet Nashi Hroshi uploaded to YouTube the first two parts of what it said would be a multi-episode series tracking illegal supply chains in the Ukrainian defense industry. These networks conspicuously involve multiple individuals from President Poroshenko’s inner circle. According to Nashi Hroshi, Ihor Hladkovsky, the son of the National Security and Defense Council’s Deputy Secretary Oleh Hladkovsky, ran a secretive operation in 2016–2017, whereby parts for tanks and armored vehicles were smuggled from Russia and re-sold to enterprises of the state defense industry monopoly Ukroboronprom—in particular the tank plants in Kyiv, Kharkiv and Zhytomyr—at inflated prices. The journalists allege that certain defense industry managers happily pocketed kickbacks, while others were apparently afraid to say no to the Hladkovskys. Moreover, the Kyiv-based machinery plant Kuznya na Rybalskomu, which belonged to Poroshenko at the time, was also allegedly involved (YouTube, February 25).

Related: Embezzlement in Ukraine's army: Ukroboronprom directors detained

Upon the videos’ release, the National Anti-Corruption Bureau launched an investigation (Tsn.ua, February 27), while Poroshenko’s rivals seized the opportunity to attack him ahead of the election. Former prime minister Yulia Tymoshenko addressed the parliament and urged the sitting president’s impeachment. She said the journalists’ findings were sufficient to suspect high treason and accused Poroshenko’s team of destroying the Army and assisting Russia (Pravda.com.ua, February 26). Comic Volodymyr Zelensky addressed his potential voters in a separate video. He asserted, in an obvious reference to Poroshenko, that the military was being “robbed” and urged replacing him (UNIAN, February 26). Zelensky, Poroshenko and Tymoshenko are currently leading the election race, recent surveys show (Ukraine-elections.com.ua, February 25; see EDM, February 11, 13).

Oleh Hladkovsky, a business partner of Poroshenko’s since the 1990s, used to chair Bohdan, the automotive division of Poroshenko’s business empire. In 2015, Poroshenko handpicked him as deputy secretary of the National Security and Defense Council. Poroshenko chairs this body, while Hladkovsky’s immediate superior is Secretary Oleksandr Turchynov, who served as interim president in between the flight of former president Viktor Yanukovych from Kyiv in February 2014 and Poroshenko’s victory in the snap presidential election in May 2014. As deputy secretary of the Council, Hladkovsky has been supervising Ukroboronprom, his remit apparently including the establishment of new supply chains to replace purchases of military products from Russia. Poroshenko banned military imports from Russia, following the annexation of Crimea and Moscow’s intervention in the Donbas region in 2014.

Related: Embezzlement in Ukraine's army: Parliament obliges investigation commission to handle case

Kyiv officially severed ties with Russia’s military-industrial complex during 2014–2015 (see EDM, December 1, 2014). However, it has clearly proved too difficult to immediately stop relying on Russian components after being part of a single military-industrial complex with Russia for decades. The official sanctions apparently prompted Ukraine’s defense industry and military to turn to informal supply channels—tantamount to smuggling in the situation of political and military confrontation and mutual embargoes with Russia. This has provided fertile soil for corruption. The website Ukrainska Pravda quoted an unnamed member of the Ukrainian parliamentary defense committee as saying, “We have been stealing [sic] parts from Russia and we shall keep stealing. We cannot get them anywhere else. We have to restore tanks, armored vehicles and other machinery” (Pravda.com.ua, February 26)

Nashi Hroshi has not been the only local media outlet to expose corruption in the Ukrainian defense industry. The weekly newspaper Zerkalo Nedeli has regularly run allegations about murky schemes at Ukroboronprom (Zn.ua, February 26). But Nashi Hroshi’s findings suggest that Ukraine—at least until recently, has continued to buy or otherwise procure military products from Russia—of which top officials were aware, in spite of the two countries’ being locked in an unofficial state of war.

Related: Far-right National Corps demand to arrest those who embezzled Ukrainian army funds

The journalists from Nashi Hroshi say they received the bulk of the data for their investigation in a message from an anonymous sender on their computer last fall. The timing and the amount of revealed evidence, including print screens and content from Internet instant messenger services, suggest that special services were most probably involved in the data collection. The resulting scandal was clearly scheduled to coincide with the election campaign. But through his actions (or rather inactions) during his presidential term, Poroshenko has also personally exposed himself to allegations (fair or not) of cronyism and corruption and accusations of a continued inability to prioritize national interests over his personal business interests. One of the country’s richest businessmen, Poroshenko never relinquished full control over his business empire upon being elected head of state. Moreover, he has appointed several former business partners and subordinates to top political posts.

Despite imposing official sanctions on Moscow and urging the West to slap more sanctions on Russia while boosting assistance for Ukraine, some Kyiv officials have been furtively buying military products from their large eastern neighbor, while enriching themselves at taxpayers’ expense, the Nashi Hroshi investigation alleges. Assuming these assertions are not eventually disproven, the negative implications for Poroshenko personally and for Ukraine’s international image are likely to be serious.

Read the original text at The Jamestown Foundation.

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