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Arms production in Ukraine: Challenges and opportunities

Author : Pavlo Barbul

Source : 112 Ukraine

Ukraine has been forced to buy a lot of military gears and ammunition abroad and rely on the “humanitarian aid” in the form of so-called non-lethal weapons
08:28, 16 December 2019

Open source

War in Donbas has been lasting for more than five years, while Ukraine has been forced to buy a lot of military gears and ammunition abroad and rely on the “humanitarian aid” in the form of so-called non-lethal weapons – in fact, the same ammunition and components from partners from abroad.

Existing enterprises that are part of the Ukroboronprom state defense concern periodically become targets of various kinds of fraud and direct attacks. As a result, production processes might simply stop, and output might cease.

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In particular, in mid-November, Kyiv court arrested the state property complex of the Mayak plant, which is part of the Ukroboronprom state concern. The property of the plant was arrested in order to... prevent its sale through the electronic trading system of SETAM e-tendering system at a lower cost.

According to the prosecutor’s office, during a criminal investigation into the organization of a fraudulent scheme for the sale of the plant’s property, it was established that the former deputy general director of the Mayak plant promised to assist a representative of the commercial structure in purchasing the company at a lower price.

The fraudulent scheme was exposed, and the organizer was detained but ... it turned out that the State Executive Service had already put up the plant for sale with an initial cost of 2,2 million USD.

The situation itself is strange, why should one pay a bribe if bidding was conducted through SETAM e-tendering system. It gives a possibility to raise the price. It is also interesting how they would evaluate the "market price" in the buyer's market (everything costs as much as one is willing to pay for it).

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And even more interesting is the story of the sale of a loan from a VBR bank to one of the tenants at a discount, followed by the seizure of accounts and property of the plant. Well, time will tell ... In the meantime, the plant, which is part of the Ukroboronprom concern and specializes in the development and manufacture of small arms, components and special equipment, modernization, and repair of armored vehicles (BRDM-2DP), might become a “temporarily” non-working plant.

The situation with the Motor Sich enterprise (Zaporizhia), which may come under US anti-Russian sanctions in case the concern participates in a transaction to purchase shares of Motor Sich JSC together with the Chinese companies Skyrizon and Xinwei, is no less disturbing.

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At least, such information was published by Yuriy Terentyev, the head of Ukraine’s Antimonopoly Committee. “You can find yourself in a completely absurd situation when the Chinese side, together with Ukroboronprom, would gain control of this enterprise. At the same time, the United States can find confirmation that the Chinese side is present in the Russian Helicopters supply chain and a Kafka situation will arise when Ukroboronprom and Motor Sich find themselves targeted by American anti-Russian sanctions,” Terentyev said.

In such an extreme scenario, besides the concern itself, all Ukrainian enterprises that finance it, including state-owned banks, might be subject to sanctions.

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In late August 2019, US President’s Security Advisor, John Bolton, said about the US concern over the sale of Motor Sich to the Chinese owners. So if someone thinks that the arms market is “free and liberal,” then he is deeply mistaken. In this market, everyone pursues their own interests, and the United States, which controls (as of 2018) 36% of the global arms market, is primarily concerned about its interests.

Against this background, any information that Ukraine plans to open a new arms production, and even with the money of investors, is received with a fair amount of skepticism. Moreover, skepticism is quite justified when you have an idea of ​​what is really necessary to create such an enterprise from scratch.

There are some rumors that in 2020, the construction of a new cartridge plant in the Dnipropetrovsk region on the territory of the Pavlohrad industrial park to begin. This is the fifth attempt to resolve the issue of the domestic cartridge production, which Ukraine, in fact, lost by losing the Donetsk State and Luhansk cartridge factories.

After this loss, only two small enterprises for “conditional production of cartridges” remained in Ukraine. In particular, their assembly. Since 2010, orders from the Ministry of Internal Affairs have been provided by RPC Fort, Ukrainian weapons manufacturer from Vinnytsia.

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Here, mostly pistol cartridges of 9 mm caliber and 5.56 mm rifle cartridges were assembled from western components. The volumes were small, and the cost, respectively, was high. There is also a line of the Ibis company. However, mainly hunting cartridges for smooth-bore weapons are collected here.

As for the Dnipropetrovsk "startup," it is assumed that the company will be the first to be built “from scratch” and completely at the expense of the investor.

According to Oleksandr Kolomiytsev, the director of the investment and innovation center of the Dnipropetrovsk Regional State Administration, already in the spring of next year, Concord Engineering plans to begin construction of a cartridge plant. “This industrial facility will be erected with the help of the latest technologies. 300 new jobs will be created there,” Kolomiytsev assured.

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And here the main doubts begin. First of all, they are connected with the fact that the return on investment in such a plant is possible only in one case: if the state is the main customer of the plant's products. And orders for cartridges should amount to the millions of pieces per month. At least. If there are no such guarantees, then the project is doomed from the beginning.

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