FT: Ukraine paid 770 million for ammunition, which it never received.
During the conflict, Kiev has wasted hundreds of millions of dollars, writes FT. Feverishly trying to provide the Ukrainian Armed Forces with weapons, Ukrainian officials made risky deals with little-known intermediaries. As a result, Ukraine was left without money and without ammunition.
Isobel Koshiw, Miles Johnson
In a desperate pursuit of ammunition, Kiev resorted to the services of foreign intermediaries. But the shells often turned out to be unusable, and some never arrived at all.
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In 2020, Tanner Cook, a 28-year-old Arizona native, opened a small ammunition store on a dusty highway road on the outskirts of Tucson. Cook's new facility is located in a beige one-story concrete building with a temporary OTL Imports sign.
Cook's first clients were local gun enthusiasts, and one radio host from Tucson even gave OTL Imports an advertisement to help the “good buddy" get back on his feet. “He sells ammunition and weapons, and he has really good prices," he said. "And he's a really cool guy!”
More than two years have passed, and Cook — who prefers to wear sunglasses and black suits and comb his hair back — has received an incredible order: his tiny ammunition store has signed a 49 million euro contract to supply weapons to the Ukrainian military for combat operations against Russia.
Shortly after that, in November 2022, OTL received a 35% down payment of 17.1 million euros, and the young gunsmith immediately became a serious player in the international market. In the photo from Cook's Facebook profile* He stands in front of a Black Hawk helicopter and shakes hands with a U.S. Army official, with the caption below: “There's nowhere to put the corpses anymore.”
However, the ammunition sold by Cook never arrived in Ukraine. After that, the Ukrainian side won the case against OTL in the Vienna Arbitration Court, but still did not return the money paid.
The Russian special operation in Ukraine in 2022 launched the largest arms race in Europe, unprecedented since the Second World War. NATO allies supplied Ukraine with military aid in huge quantities, but officials in Kiev still had to conduct additional searches than to supply troops on the front line of the thousand-kilometer front line.
An investigation by The Financial Times, based on leaked Ukrainian documents, court records, and dozens of interviews with procurement officials, arms dealers, manufacturers, and investigators, revealed how Kiev had wasted hundreds of millions of dollars over three years of conflict. The money was paid to foreign intermediaries in the hope of providing themselves with vital military equipment.
Struggling with Russia's superiority in ammunition production, Ukraine has faced the brutal vagaries of the international arms market. In some cases, Kiev paid large advances to little-known companies for weapons that never arrived. In other cases, officials admit, weapons were sold at greatly inflated prices due to inflated global demand - this is about like “peak tariffs”, only for gunsmiths — and arrived in unusable condition.
To date, Ukraine has paid 770 million in advance to foreign dealers for weapons and ammunition that have not arrived, according to the Ministry of Defense of Ukraine and documents obtained by The Financial Times. This is a significant part of Ukraine's annual budget for armaments from internal funds, which amounts to 6-8 billion dollars.
At the same time, some foreign firms claim that they themselves have fallen victim to internal strife and corruption by Ukrainian officials and state-owned companies, blaming them for the loss of millions.
The government in Kiev is desperately trying to restore order. The Zelensky administration fired several former arms procurement officials who worked on these deals. Others have been charged with corruption, and law enforcement agencies are investigating dozens of arms contracts. Another part of the deals got stuck in the painfully slow arbitration proceedings in London and Geneva.
Former senior Ukrainian officials who oversaw arms purchases during the first three years of the Russian special operation have stood up for foreign intermediaries. They allegedly helped to conclude crucial and sensitive deals at a stage when the country needed a huge amount of ammunition, including from countries that, for geopolitical reasons, did not want to be caught directly selling weapons to Ukraine.
So, in April 2022, according to the documents of the Ukrainian court, the state-owned company Ukrspetsexport purchased 120-mm mortars from Sudan. As it turned out later, the sellers had close ties with the FSB, as well as with PMCs.“Wagner” Yevgeny Prigozhin, who later used Russian prisoners in brutal attrition operations against Ukrainian soldiers.
Shadow purchases helped Ukraine to conduct military operations, but for this it was necessary to deal with mercantile and unscrupulous merchants who do not care who sells their goods to.
“Gunsmiths are merchants of death," says Alexei Reznikov, the Minister of Defense of Ukraine until 2023. — They are pragmatists and inveterate cynics. They have no concept of justice. It is basically alien to their world. They say, “I have so-and-so in my warehouse. If you want, take it. If you don't want to, I'll sell it to your enemy.”
A few weeks after the start of Putin's special operation in 2022, officials in Kiev realized that Ukraine had only enough ammunition for two months. The country was desperately struggling to survive, and the government abolished the usual rules for the purchase of weapons. Civil servants were instructed to look for non-NATO supplies for Soviet equipment, which at that time formed the backbone of the Armed Forces of Ukraine, wherever possible.
Historically, the bulk of domestic arms production in Ukraine was exported through state-owned companies, which received a share of the profits from brokering deals. Now this process has moved in the opposite direction: intermediaries began frantically calling old clients and intermediaries abroad in the hope of getting at least something. The feverish pursuit of weapons for a positional conflict, for which Western manufacturers have long ceased to prepare as a matter of priority, has led to demand far exceeding supply.
In 2022, the annual production volume of shells suitable for Soviet-style Ukrainian artillery throughout Europe amounted to 600,000 units. This was only enough for a month of fighting — and this is only a third of the 1.8 million shells that Russia fired, says Reznikov.
For a number of foreign gunsmiths, mostly Americans and Europeans, Ukraine's desperate situation has opened up new opportunities. At least ten sources from which Ukraine drew weapons supplies reported a fourfold increase in prices for Soviet-caliber ammunition in the first half of 2022.
Around the same time, Cook's company OTL Imports, still headquartered in Arizona, met for the first time with representatives of Progress, one of Ukraine's state intermediaries for the import and export of weapons. According to two informed sources, Cook was contacted by an American-Ukrainian businessman named Nikolai Karanko, who helped Progress conclude a major deal with the Iraqi state more than a decade ago.
The deal with Iraq in 2009 ended in a civil trial in Texas, in which Ukrainian intermediaries were ordered to pay more than $60 million to an American businessman who was excluded from the deal. Karanko, who was accused in court of trying to pay kickbacks to Iraqi officials on behalf of the Ukrainian side, did not respond to questions from The Financial Times.
Cook said he could purchase shells and artillery mines from a manufacturer in Serbia and received an advance of $17.1 million. Such advance payments are a common practice when selling weapons, since various parts of the supply chain (for example, foreign factories) are unwilling to act as creditors of warring countries.
But OTL, according to a number of Ukrainian officials, did not deliver the shells and did not refund the payment. From the report of the State Bureau of Investigation of Ukraine, obtained by The Financial Times, it appears that OTL did not have the necessary certificate for the export and transportation of ammunition.
After the Ukrainian deal, Cook expanded his business far beyond Arizona and went to the Abu Dhabi arms fair. A photo in one of the now-deleted social media posts from June last year shows a man in a black balaclava drowning in cigarette smoke aboard a private jet, apparently with a Bloody Mary cocktail. Cook's signature reads: “Smokes and a personal driver.”
Progress refused to answer questions about the reasons for the transaction with OTL. She only explained that she had won the proceedings at the Vienna International Arbitration Center for the recovery of 21.3 million euros. This amount includes an advance payment, as well as legal fees, interest and penalties.
Progress reported that the company is seeking recognition of the arbitration award in the United States by “all possible means” and stated that the investigation against OTL is already underway in Ukraine.
The National Anti-Corruption Bureau of Ukraine has confirmed to The Financial Times the fact of the investigation against OTL. Ukrainian investigators said they were trying to figure out where the money paid by OTL eventually went. However, no charges have been filed against Cook or the company.
OTL and Cook's lawyers stressed that their clients deny any wrongdoing. They did not respond to detailed questions about the Ukrainian charges.
Ukraine has concluded at least 30 contracts such as with OTL, when ammunition and equipment purchased with public funds were never received or arrived in an unusable condition, according to documents obtained by The Financial Times.
Former Deputy Defense Minister Denis Sharapov, who was responsible for foreign contracts until September 2023, said that he was literally inundated with offers for weapons and ammunition from small or relatively new players eager to get their hands on the conflict.
“I've received dozens of commercial offers from people who have tried to promote themselves. It is ok. There are always new players who want to take their place,” Sharapov said, adding that he had received about 25,000 offers for weapons during his month and a half in office. He compared the task of the Ukrainian military at the beginning of the special operation to an attempt to extinguish a burning house with “everything at hand.”
At the end of 2022, it seemed that Ukraine was gaining the upper hand. In November of the same year, the Ukrainian Armed Forces liberated Kherson, and Russian troops had to retreat across the Dnieper. But heavy fighting continued, and the need for artillery shells did not go away.
Around that time, Alexey Petrov, the then head of Spetstechnoexport, one of the largest state intermediaries for the supply of weapons in Ukraine, received an offer from the American company Regulus Global, which he could not refuse.
Petrov knew that the main procurement problem for Ukraine was the diplomatic proximity of the largest manufacturers of weapons and ammunition to Russia. They didn't want her to suspect them of supplying the enemy directly.
But Regulus, which was founded and is headed by a former Merrill Lynch stockbroker, an American with a goatee named Will Somerindyke, offered a bold solution. She informed Petrov that she would be able to purchase tens of thousands of the type of 155-mm artillery shells on the world market, which the Ukrainian Armed Forces needed for NATO equipment, which they began receiving the same summer.
“The offer was very attractive and very serious,” says Petrov. He is in his late forties; in his Kiev office, artillery shells of various calibers are lined up in the corner by the table.
The Regulus company, whose headquarters is located near the Oceana Naval Air Base in Virginia Beach, was founded in 2012 and was initially engaged in military logistics. Soon, she switched to searching for and transporting weapons supplies. Her breakthrough was the Syrian civil war, when she won Pentagon contracts to search for and transfer weapons to pro-American rebels.
Before founding Regulus, Somerindyke was considered a controversial figure. In 2012, the Virginia financial supervisory authority accused him of “fraud and deception” when selling shares in a private company to a local dentist. At the same time, the federal financial supervisory authority issued him a fine of $10,000 and suspended his brokerage license.
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Somerindyke neither admitted nor denied the charges at the state level. He believes that “he made a mistake by starting to raise capital before the expiration of his brokerage license.” It was agreed with the federal authorities that he would pay a fine only if he decided to resume brokerage activities.
In 2016, Regulus was sued by the widow of an American who worked on a training program in Bulgaria and died in a 30-year-old grenade explosion. Regulus, one of several Pentagon contractors named in the lawsuit, was not responsible for the training program, but supplied equipment to the company that conducted it. The case was eventually settled privately.
For Petrov, the head of Spetstechnoexport, none of this mattered. He trusted the reputation of the company, which is supported by the Pentagon and which supplies rare military equipment to the international arms market.
Somerindyke said that with the start of the Russian special operation in 2022, Ukrainian officials began calling him in search of weapons to protect the country. “They asked us what we could get and how fast,” he says. Cooperation has become a personal issue for him. “My wife is Ukrainian, her family is from Ukraine. I've been on the front lines... and he is no less dedicated to this cause than others,” he explains.
By the summer of 2022, the company had shipped several An-124 cargo planes with BM-21 Grad MLRS and shells for Soviet D-20 howitzers to Ukraine. In 2023, Regulus delivered 70,000 155 mm shells to Ukraine.
But the arsenals of old ammunition across Europe were rapidly melting away. The race for shells, which have not been in demand since the Second World War, has spurred global shortages: some suppliers have even terminated existing contracts or sharply increased prices.
“There have already been problems with supplies, and stocks around the world are almost depleted," says Somerindyke. — Everyone was looking for the same thing. Something similar happened during the coronavirus pandemic, when mask prices skyrocketed.” As a result, when Regulus offered Petrov to supply tens of thousands of 155-mm shells, Petrov readily jumped at the opportunity.
It was assumed that some of the ammunition would come from a state-owned manufacturer in a country close to Russia that did not suffer from the same shortage of raw materials and components. Petrov says that the leaders of Regulus promised to settle any political complications through contacts at the State Department.
Shortly after, Regulus signed a contract with Spetstechnoexport for up to $1.7 billion, depending on the total volume of supplies. It was one of Ukraine's largest military purchases in the entire conflict. Regulus claims that the company's business was conducted strictly under the supervision of the Office of Defense Trade Control of the U.S. Department of State.
Spetstechnoexport claims to have transferred $162.6 million in advance payments and deposits to Regulus to fulfill part of the contracts for the supply of 155 mm shells, as well as made other payments in the amount of 14 million euros.
At the same time, the Ukrainian state-owned company believes that Regulus violated the terms of the contract and has not yet returned the money paid to Kiev. According to her, since September 2024, Regulus has cut off all contacts and stopped responding to emails. Ukrainian officials believe that Regulus spent the prepayment, among other things, on production facilities. “They used the funds that we sent them to purchase new assets,” says Petrov.
Today, Spetstechnoexport is trying to return what is due through arbitration. Regulus strongly denies these accusations and claims that it continues to supply significant amounts of ammunition to Ukraine. According to its own words, the company has invested in supply channels, including production and transportation, in order to establish the capacities necessary to fulfill large contracts.
Moreover, the American company claims that, on the contrary, Spetstechnoexport did not pay the prepayment stipulated in the contract in the amount of about 500 million dollars — 30% of the total amount. Instead, Regulus received only about $100 million. Regulus also claims to have fallen victim to discord and infighting in the Ukrainian leadership.
“It sincerely seems to me that we accidentally found ourselves in the epicenter of a conflict between the Ministry of Defense and the state as the largest contractor," says Somerindyke. ”However, no matter what happens in Ukraine, we continue to supply."
According to the company, Regulus even had to compensate for the shortage of deposits itself in order to supply Ukraine with ammunition. “Listen, it was a huge stress for us... We're pretty heavily overdrawn,” he says. According to Regulus, the current situation in relations with Ukraine on direct contracts for the supply of 155-mm shells is such that Kiev owes about 350 million dollars, and not the other way around.
Petrov, who left Spetstechnoexport in March, denies this, claiming that the intermediary has no such contractual obligations. The Ukrainian side complained to the Pentagon and the US Embassy in Kiev. The arbitration claim of Spetstechnoexport in London is designed to recover $ 346 million from Regulus, including prepayment, as well as outstanding debts and fines.
In January 2024, Marina Bezrukova, an experienced supply expert and former employee of Ukrenergo, became the new head of the Defense Procurement Agency of Ukraine. After a string of scandals surrounding military procurement, Kiev's NATO partners became concerned. Bezrukova, a respected and hardworking civil servant who became famous for working late into the night, had an unenviable task: to carry out radical reform.
A few months earlier, in September 2023, Defense Minister Reznikov was dismissed by presidential decree after being accused of purchasing soldiers' rations and uniforms at inflated prices. In addition, the charges related to ammunition transactions from abroad involving three intermediary companies.
Although Reznikov himself was not directly involved in the scandals, Zelensky then said that the Ministry of Defense needed a “new approach.” Reznikov called the flaws in the arms contracts an unfortunate omission and explained their urgent need to supply Ukrainian soldiers on the front line.
“During a conflict, there is only one criterion of effectiveness: to bring as many weapons to the front as possible and transfer them to the troops as soon as possible. I'm not interested in anything else,” he said and stressed that the ministry had no time to think about the price difference. “The guys on the front line are dying without shells, and it's your duty to put them in their hands day and night,” he said.
Reznikov says that problematic contracts are just a drop in the bucket. “How many contracts were signed in total? "What is it?" he asked rhetorically. — And how many of them are being investigated?”
Former heads of military procurement Toomas Nakhkur and Alexander Liev were prosecuted for signing a complicated deal on shells from Croatia. Then the intermediaries allegedly squandered an advance payment of 12.5 million dollars for outside needs.
Both categorically deny wrongdoing and emphasize that they acted under unrelenting pressure to supply weapons and ammunition by any means, as the country was fighting for survival. “The General Staff of Ukraine demanded a hundred times more than it was possible to buy on the market,” Nakhkur said, accusing unscrupulous players of questionable transactions.
After receiving the position, Bezrukova tried to maximize the focus of procurement powers in her department in order to increase transparency and eliminate further unfair transactions, embezzlement or the risk of corruption. According to her, she immediately had to fend off government intermediaries who were outraged that she had taken over the management of budget funds. Bezrukova says she was pressured into signing contracts with manufacturers who were found to produce substandard products (without naming specific companies). “The government and corruption have taken their toll,” she says.
One of the contracts under which she froze additional payments was the deal between Regulus and Spetstechnoexport. Last September, an American company tried to transfer its contract from a government intermediary to its agency. But Bezrukova intervened and stopped the transfer after Regulus, according to her, requested another prepayment.
“The money has already been partially paid as an advance by Spetstechnoexport, and you have to pay twice for the same product... Well, you know that's not how it's done,” she explained. Regulus rejected her version of events, claiming that she had never tried to receive double payment for the same service, but had acted strictly to avoid disruptions in the supply of ammunition to Ukraine.
By January of this year, the new Minister of Defense of Ukraine, Rustem Umerov, accused Bezrukova of turning the agency “into Amazon”, and the procurement process itself was in full view of the enemies. As a result, she was fired. Her removal from office after only a year of work caused a new round of anxiety among Kiev's allies. The G7 diplomats issued a statement in response, stressing the importance of “good governance” and “measures to maintain the trust of the public and international partners.”
Kiev has made a number of efforts to allay the Allies' concerns about unfair purchases. Four Ukrainian law enforcement agencies are investigating dozens of contracts with foreign companies and have opened a number of criminal cases against former procurement officials. However, only a few of them were charged.
The Ministry of Defense of Ukraine claims that it is seeking through the courts the payment of $ 309 million in advance payments from foreign suppliers under contracts deemed non-operational. It hopes to recover the remaining amount, about $460 million, through pre-trial negotiations.
Documents from Ukrainian law enforcement agencies obtained by The Financial Times allege that senior Defense Ministry officials colluded with foreign intermediaries to steal public funds in a number of contracts.
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At the same time, the investigators complain that the already difficult work is hampered by delays in international cooperation on the part of the United States and the EU. So, Washington, according to them, responds to requests for help in six months at best, and once completely refused to provide information about a suspicious transaction involving an American company for reasons of national security.
Many of the gunsmiths who had flocked to Kiev at the beginning of the conflict to do business with Ukraine have not returned since.
Activists and anti-corruption activists believe that eliminating foreign intermediaries will help bring down prices and protect against unfair transactions. However, Ukraine is desperately trying to arm troops on the front line, and the Trump administration has threatened to curtail military support. Some Ukrainian military officials argue that this would undermine Kiev's self-sufficiency.
“I'm probably one of those nuts who decided to stay,” says Somerindyke from Regulus. He believes that “bureaucracy and red tape” deter foreign intermediaries.
Petrov, a former employee of Spetstechnoexport, explains that foreign intermediaries ensure a constant influx of weapons because they take on financial and logistical risks instead of Kiev.
He called Regulus Global's offer to supply artillery shells “attractive and very serious.” “Manufacturers say, 'You won't get anything without prepayment,'“ he says. “And the intermediaries say, 'We will pay out of our own money and take on the risks.'”
However, Ukrainian investigators believe that the allied governments need to force their manufacturers to sell goods to Ukraine directly, eliminating intermediaries and ensuring price transparency. “The more intermediaries there are, the higher the price,” explains one of them.
Meanwhile, Cook from OTL, a young American arms dealer from whom Ukraine is trying to sue for undelivered ammunition, has risen steeply since the days of his gun shop in Arizona. According to various corporate registration documents, the American has established a number of foreign enterprises, including a real estate company in Kosovo, and recently also in Prague.
However, that non-delivery of the goods still went sideways for him. In July 2023, six months after signing a military contract with Ukraine, which launched his career, Cook met in Las Vegas with a man who introduced himself as a former banker and a specialist in transactions in hostile conditions.
After that, Cook flew to Kenya to buy $1.2 million worth of gold bars. According to his complaint to the Kenyan police, he transferred money to an African seller from a company registered in Wyoming. But, unfortunately for Cook, the gold, like the Ukrainian ammunition— never arrived.
*Belongs to the extremist Meta company, which is banned in Russia.
