FT: How Ukraine blew hundreds of millions on failed arms deals

Since Russia’s full-scale invasion in early 2022, Ukraine has faced not only a military onslaught but also immense challenges in securing the necessary ammunition and weapons.

A critical and largely underreported aspect of this struggle has been Kyiv’s costly missteps and vulnerabilities in the international arms market, which have resulted in hundreds of millions of dollars lost to failed and fraudulent arms deals, Caliber.Az reports per The Financial Times.

Ukraine’s defence budget, ranging between $6 billion and $8 billion annually, has been strained by the need to rapidly procure vast quantities of ammunition, particularly Soviet-calibre shells, to sustain its predominantly Soviet-era arsenal. However, the country’s reliance on foreign intermediaries and arms brokers, many operating in a murky and high-risk marketplace, has exposed Kyiv to exploitation and corruption.

Official figures and documents reviewed by the Financial Times reveal that Ukraine has paid around $770 million in advance payments for weapons and ammunition that have not been delivered. These funds represent a substantial portion of Ukraine’s self-funded arms budget since the war began. Many deals involved little-known or newly emerged suppliers who capitalised on the soaring demand and inflated prices, akin to “surge pricing” in the arms trade.

In some cases, weapons and ammunition arrived in unusable conditions, while others never materialised at all. A notorious example is the contract with OTL Imports, a small Arizona-based firm introduced to Ukrainian intermediaries by an American-Ukrainian businessman with a controversial past.

Despite receiving $17.1 million upfront for Serbian-made shells, OTL failed to deliver any materiel and lacked the required export certifications. This deal is currently under investigation, with legal arbitration and anti-corruption probes ongoing.

Such cases illustrate the perilous rush by Kyiv to secure supplies amid desperate conditions. Early in the war, Ukraine had only two months’ worth of ammunition stockpiled. Normal procurement protocols were suspended, and officials scrambled to source weapons from any available source, including grey-market suppliers and intermediaries who often operated without transparency. Some deals involved state-owned arms companies reaching out to former export customers, but these expedients increased the risks of fraud and corruption.

At the same time, some foreign arms companies claim they were victims of infighting and corrupt practices among Ukrainian officials, complicating the picture. The Zelenskyy administration has responded by dismissing and indicting several procurement officials, investigating dozens of contracts, and seeking to clean up the system.

This chaotic environment highlights the complexities Ukraine faces in waging a high-stakes war while managing a precarious arms supply chain fraught with mercenary dealers, geopolitical sensitivities, and internal corruption. The losses underscore the urgent need for tighter controls, international oversight, and transparent procurement to ensure vital resources reach Ukraine’s frontlines efficiently and securely.

By Aghakazim Guliyev