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The “Ukrainian Shield” – The Ukrainian MIC

January 9, 2016

Almost one year ago, a rather pointed and prickly entry was published relating to the dire state of the Ukrainian military industrial complex.  The entry bemoaned chronic corruption, abysmal supply chain management, grotesque bureaucracy, and hapless management.

The entry concluded – “Ultimately any western advanced defensive arms assistance should be little more than filling the immediate short term gap, in as large a quantity as is feasible and/or necessary in the areas where Ukraine clearly has the experience and capabilities to produce advanced defensive arms for itself.  Dependency upon advanced arms from friendly nations, sensibly, should be limited to what Ukraine cannot produce itself.

On the long list of Ukrainian reforms – it may be wise for NATO and/or certain NATO members advising Ukraine on numerous military and civilian matters, to put the reform of the Ukrainian defence industry/military industrial complex on the agenda – somewhere very near the top.  When all is said and done, the threats it faces today, will be the same threats it faces a decade from now.”

That was then – so where is Ukraine now with regard to its MIC related issues?

It seems there is nothing quite like illegal annexation and continuous daily kinetic action in the occupied Donbas to focus collective and relevant minds – notwithstanding the President wanting Ukraine to become one of the top 5 global suppliers of military equipment, rather than historically an almost permanent top 10 ranking nation.

A priority of course, was and remains, the replacement of Russian produced and supplied parts that pre-war were part of the framework of military-technical cooperation between the two nations.  Thus far, according to Roman Romanov of Ukroboronprom, some 35% have been domestically produced through a retooling programme and supply chain expansion.  Currently 114 companies external of the  behemoth, Ukroboronprom across Lviv, Ternopil, Mykolayiv, Kherson, Chernihiv, Khmelnytsky, Cherkasy, Zhytomyr, Zaporizhzhya, Ivano-Frankivsk and Kyiv, are substituting previously Russian produced parts – 247 previously Russian made parts that are used within 37 enterprises of the vast Ukroboronprom empire, to be more precise.

UkroPresumably the remaining 65% is feverishly being worked upon domestically or alternatives sought from other nations.  Indeed 178 foreign companies are in discussion with Ukroboronprom over rubber products, radio components, and aircraft components etc.

Ukroboronprom has also taken part in 40 meetings over the past year of the joint working group, the Ukraine-NATO military-technical cooperation (SRGO) and established cooperation with the alliance in the field of defense standardisation, as well as the NATO Conference of National Armaments Directors of the Alliance (CNAD) – as well as its five subgroups: NAAG, LCMG, JCGUAS, JCGGBAD, and Smart Defence.

Talks are at various stages with external armaments partners – American Textron Systems, Worldwide Aeros Corporation, Barret, Pratt & Whitney Canada, Inkas, French Airbus DS Geo SA, Thales Group, Sagem, the Italian Iveco, Polish WB Electronics, HSW , Lubawa SA, PCO and PGZ, as well as the Turkish Aselsan, TAI, Havelsan and Roketsan – apologies to those missed, for there will be some.

The aim of Ukroboronprom under the “Ukrainian Shield” programme is to be producing NATO standard military equipment by 2020 – a wise decision with Ukraine having been offered the chance to join the NATO system of arms procurement.

Whilst on the subject of procurement, what progress in the defence sector of Ukraine?  Has the rampant corruption and atrocious bureaucracy been in any way confronted?

Ernst & Young have been actively involved with the Ministry of Defence in sorting out the abomination of a procurement system that is clearly unfit for purpose (unless that purpose is theft and inefficiency on a gargantuan scale).  For whatever reason, the Ministry of Defence has its own – or will have its own – on-line procurement system, entirely separate from all other ministries upon the main on-line procurement platform.  This segregation perhaps a legacy of decisions made during more hectic times for the Cabinet of Ministers during 2014, and a requirement to provide transparency for those on the front lines (as well as all other taxpayers).  Perhaps it is for other security orientated reasons.

However, whilst the on-line procurement system for every other ministry is now available and a legal requirement – that is not yet so of the Ministry of Defence.  Per normal, having been segregated from the system for all and sundry, a separate law regarding the regarding procurement and the Ministry of Defence exists only in draft form and currently sits patiently on somebody’s desk at the Bankova awaiting submission to the Verkhovna Rada (after the Presidential Administration has cast a discerning eye over it first it would appear).

At some point however, the Verkhovna Rada will eventually legitimise a separate procurement system for the Ministry of Defence and legislate accordingly for the public procurement being on line – naturally in accordance with NATO standards if joining the NATO procurement system by 2018 as planned.

Whilst all this has been going on, some better management has also been brought in, and domestic production has more or less kept the eastern front supplied with hardware that Ukraine can and should be providing for itself (obviously not the Canadian mine clearance equipment or US anti-battery radar etc).

Quite what the current level of corruption is within the defence procurement system, compared to what it was, will be difficult to assess – however, it seems likely to have reduced too – as tends to happen when foreign auditors are poking around in existing procurement systems.

With the occupied Donbas perhaps settling down into something akin to Nagorno-Karabakh (rather than Transnistria), it seems quite possible that with continued NATO expertise and input, Ukroboronprom will be one of the (perhaps too few) State agencies that may actually meet its reform and development plans – and per timescale too.

Credit where credit is due, it’s something of a turnaround from this time last year – even if there remains a long way to go.

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