by Yuriy Nikolov, originally published by ZN.UA
The worst has happened, although we could predict it.
I apologize in advance to the readers for the pain this publication could cause. But in fact, the Ministry of Defense led by Oleksiy Reznikov should apologize, because it seems that during the great war it have increased its appetite for embezzlement. I am only talking about the actions of the rearguards, which, in my opinion, are aimed at undermining the state’s military capability.
At my disposal, from a source in the Armed Forces, there is an agreement of the Ministry of Defense for the provision of food services in 2023 for military units stationed in the Poltava, Sumy, Kyiv, Zhytomyr, Chernihiv and Cherkasy regions, which far from the contact line. I will emphasize once again, we are not talking about “zero” line, delivery to which can really make any purchase more expensive.
The agreement worth 13.16 billion (!) UAH was concluded on December 23, 2022, that is, only a few weeks ago.
Also at the disposal of ZN.UA (we will return to it a bit later) is the agreement on food for soldiers in the same region in 2021. Therefore, we can compare the purchase prices of food for the military both with current prices in stores and with prices before the war, of course, taking into account inflation.
For comparison, I chose the “Silpo” chain of stores in the residential area of Kyiv. Products from the places of their production must be transported to it as far as to the military in the Poltava, Sumy, Kyiv, Zhytomyr, Chernihiv and Cherkasy regions. In the food catalog for the military, there are hundreds of items in total, including chilled sturgeon. But we understand that only simple products will be supplied to the soldiers from this entire assortment. That is why we will compare them.
The prices of the most popular foods turned out to be 2-3 times higher!
So, the Ministry of Defense contracted eggs for 17 UAH per item, while the retail price in a Kyiv store is now about 7 UAH per item.
Potatoes were ordered at 22 UAH per kilogram, while the retail price in the store is 8–9 UAH.
A chicken thigh was ordered for 120 UAH per kilogram, and in the store it costs 80 UAH.
Moreover, we compare with retail prices, which already include both the manufacturer’s profit and the store’s markup, they are a priori higher than wholesale prices. More comparisons in our infographic (see original article). So, the attentive reader will notice that the contract is not only about procurement, but also about the provision of catering services. Maybe that’s why it’s more expensive? No, if you delve into the document, you will see that the services are really there as a separate item of expenses in the amount of 30 million UAH , i.e. 0.2% of the total amount of the contract, not even 2% and definitely not two times of a price
Before the invasion, in 2021, the prices in the contract for the food of fighters in the same regions were as follows: eggs at 3.6–3.9 UAH per item, potatoes at 10.56 UAH , chicken thigh at 67 UAH per kilogram. Even if inflation is taken into account, the difference is still impressive, because the increase in prices for the year was 26.6%, not 266 times. If we take into account the abnormal increase in the price of eggs by 99% for the year, then this year they should cost a maximum of 8 UAH per item, not 17 UAH. And if someone remembers how he or she bought food a year ago, he or she should notice that the deviation from the market prices for products in last year’s contract of the Ministry of Defense was relatively insignificant – up to 20%.
The current contract in the amount of 13 billion UAH was concluded by the Ministry of Defense with Active Company LLC. This company has a charter capital of 1,000 UAH and is registered at the “mass registration address” in Kyiv: 25A Degtyarivska Str, letter L. In 2021, the Tax Service cancelled the VAT payer’s certificate of this company due to the lack of supplies and failure to submit declarations.
In 2019, Active Company LLC appeared in the criminal proceedings of the National Police No. 12019100100003229. The company allegedly submitted a forged document to participate in the tender for the supply of beef for the institutions of execution of punishments of the State Criminal Enforcement Service.
A month before concluding this contract with the Ministry of Defense, Valeriy Mykolayovych Melesh from Bila Tserkva (Kyiv region) became the founder and director of Active Company. Previously, he was the director of the State Enterprise of the Ministry of Defense “Bilotserkiv Military Market”.
The first founder of Active Company in 2016 was Tetiana Hryhorivna Sheremet. Previously, she was the director of the subsidiary “Odesa Military Trade” of the State Enterprise of the Ministry of Defense “Department of Trade of the Southern Operational Command”.
That is, “Active company” is most likely a “front company” created by professionals in the field of food supply for the military. This company already had small government orders in previous years, but its star shone only now, when information about the procurement of the Ministry of Defense was completely hidden from Prozorro.
As mentioned above, ZN.UA still has the 2021 food contract for soldiers, because it was published at that time. It was published completely openly in Prozorro. But with the beginning of the Russian invasion, the state decided to hide information about all military purchases, including those made in previous years.
There was no doubt that even before the invasion, the Ministry of Defense was making a profit on billions in food supplies for the soldiers. It was not for nothing that there were scandals, and the monopolist pushed competitors away even with the help of MPs by from OPzZh Oleksandr Ponomaryov. His russian citizenship was found even before the invasion, and with the beginning of hostilities he “dissappeared” in the occupied territory in Berdyansk.
But as already mentioned, then the purchase prices were published in Prozorro, and they were inflated not as rudely as now. And after the complete concealment of purchases, the Ministry of Defense allowed itself to order food 2-3 times more expensive than the market price. And not by 1 or 2 billion, but by 13 billion hryvnias.
We should also note, the December agreement with “Active Company” was signed by Bohdan Khmelnytskyi on behalf of the Ministry. This is the same director of the state procurement department, who was searched in the summer in connection with the embezzlement of ammunition supplies for the military. Khmelnytskyi, after the beginning of the invasion, in March, signed a contract for the supply of body armor with a Turkish company, which was supposed to receive them from a company from Bahrain. The Ministry of Defense paid 580,000 USD in advance, but received nothing at all. And after the search of Khmelnytskyi, the department stated that no suspicions were raised against him, which is why he continued to sign agreements. At the disposal of ZN.UA, from a source in the Cabinet of Ministers, there is a document similar to the report on the SBI investigation into the purchase at inflated prices and inadequate quality of boots for the military, where Mr. Khmelnytskyi is also a key figure, and a document about a working meeting devoted to issues of supply to the Ministry of Defense and initiated by First Deputy Prime Minister Yulia Svyrydenko. These events of August 2022 were confirmed to us by several independent sources, including the SBI. Apparently, they did not become an obstacle for further abuses at the Ministry of Defense.
Let’s sum it up. With the beginning of the invasion, the Ministry of Defense received complete freedom to purchase food and supplies for military personnel in an opaque manner. As a result, we have purchases at inflated prices. At the same time, the Ministry of Defense allows itself to hide information even from the Parliament, refusing to publish information on the purchase prices for bulletproof vests and winter clothing.
It is a dubious decision to make such a general decision in the midst of a military confrontation. Of course, if the Ministry of Defense wishes to respond to our official request, we will supplement the text with its position. But so far we have not received answers to any of our questions about how the ministry analyzes the prices in the signed contracts, how such markups are justified, and what, in the opinion of the department, is an acceptable margin for the supplier.
We would like to remind the readers that at one time the Minister of Defense Yury Yekhanurov was dismissed from his post for a similar story with inflated prices, described in ZN.UA. Only then was 2009 and there was no war, neither local nor large. And the current bet of both the Ministry of Defense and Bankova on the media trend “they will be buzzing for two days and calm down” is no less infuriating than the distribution of army money.
All this for a complete sense of impunity of the minister who does not get out of the air of the “Unified marathon” as the savior of the nation. The minister believes that the Mavic drones, which are the most popular among the soldiers of the Armed Forces, are absolutely “useless”. Although volunteers deliver them in hundreds so that our army has eyes on the front. And Yuriy Kasyanov confirms this in his article for ZN.UA.
The general public can help the authorities with price control, if necessary. It is enough for the President’s Office to simply return the publishing data of price per item for the goods purchased by the Ministry of Defense in Prozorro. We are not asking for information about the volume of contracts or warehouse addresses. We only ask about the price of potatoes, bulletproof vests and helmets. We will help the rear-line servicemen to return to normal.