How Western companies make a fortune on brokering covert arms deals for Ukraine

By | January 26, 2023

The Kyiv Independent reports:

When Russia unleashed its all-out war in February last year, Ukraine urgently needed weapons and ammunition to defend itself.

Desperate for arms, the country was ready to buy at any cost, a top-ranking Ukrainian official involved in the hunt for weapons in the first weeks of the war told the Kyiv Independent.

European private arms dealers saw an opportunity and drove the prices of their services up. In one specific case, the Kyiv Independent and partners found that one broker took three to six times the market average for mediation.

Increased prices affected Ukraine’s allies’ spending power. The higher the prices, the fewer weapons Ukraine ends up receiving to defend itself, Ukraine’s military attaché in the country’s embassy in Belgium told the Kyiv Independent’s partner in this investigation, The Investigative Desk.

In mid-March, the price of one specific ammunition shipment had risen by almost a third after a complex chain of intermediaries was set in motion to get the arms to Ukraine.

First a Dutch, then an Estonian, and finally, a Czech company got involved in providing Ukraine with much-needed ammo.

The supplier that appears to be the final one in the chain, a Czech company called Excalibur International, is well known to Ukraine’s military industry. Ukraine’s state-owned arms company Ukroboronprom has been working with the company for years. Yet, in this case, Excalibur International’s supplies to Ukraine have taken place through a chain of intermediaries.

As a result of the deal, at least one broker received 2 million euros, 30% of the contract, in commission – an abnormally high commission, according to industry insiders.

“Many companies around the world have earned excessive profits from the war in Ukraine,” said Fedir Venyslavsky, a lawmaker with the Servant of the People ruling party and a member of the parliamentary committee for national security.

Why involve brokers at all if they drive the prices up?

The intermediaries normally make sure that the deal goes smoothly by guaranteeing payment. Additionally, in wartime, their presence can be justified by sellers’ fear of Russia. Bulgaria, for example, refused to sell to Ukraine directly up until December, afraid of repercussions from the Kremlin. The involvement of a middleman can often disguise the real supplier.

But intermediaries can also be a cover to embezzle money. Ukraine has a long history of corruption in military procurement. Now, amid martial law, bidding is no longer public, which makes it almost impossible to trace where the money goes. [Continue reading…]

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