Why Ukraine’s Soviet-Era Defense Sector Need Reforming Badly
20 December, 2016


“Ukraine’s military at the highest level and many in the defense ministry are still working with old Soviet concepts”, says Glen Grant, a former British Army Colonel who is helping to reform the country’s military. He says, “In wartime, they are staying with the familiar. They are holding onto mother’s apron as tightly as possible”.


Mr. Grant has been working closely with Ukraine’s Ministry of Defense to reform the armed forces housing system. And change is desperately needed. An outdated Soviet-era law means a backlog of 44,000 service families are waiting to receive an all-government paid apartment. This alone could leave the country’s MoD with a 25 billion hryvnias bill (approximately $950 million at recent exchange rates).


After the fall of the Soviet Union, Ukraine inherited a splintered collection of what was once part of the USSR’s mammoth military production empire. The accompanying factors have been the mentality and culture which are slow to change, according to Maksym Bugriy, at the Razumkov Center.


It’s this lack of a modern, united strategy for the armed forces that is causing the biggest stumbling block, according to Mr. Grant.


“The current minister (of defense) is doing a lot to create change but he is still a general. There is a need to look at things in two ways, where civilians look for value for money and the military look at capability and how to kill people better. And if you put these two together, you get the best course. And right now, we have the Ministry of Defense with the budget and the money but then we have the General Staff making the plans.”


The need for a new structure for Ukraine’s defense sector has also been stressed in a recent study by RAND, an American non-profit global policy think-tank. The organization lists the military as one of the most trusted by society but stresses the need for the civil society to partly have control. In fact, RAND recommends a civil minister of defense is appointed.


Meanwhile, Ukraine’s state arms manufacturer Ukroboronprom has been criticized for its lack of transparency and for its ambiguous import system. RAND has called for a complete overhaul of the state-owned companies in the defense sector in order to attract foreign investment and improve Ukraine’s military.


“In my opinion, there should be transparency and public scrutiny. Now, the import of weapons (by Ukroboronprom) was heavily criticized by RAND. But I would like to tell you about two minor corrections. We (Ukroboronprom) act as a procurement agency for the Ministry of Defense but we don’t actually decide what should or should not be imported,” explains Denys Gurak, the Deputy Director at Ukroboronprom.


RAND also criticized the weapons procurement system, since most of it has been done without an open competition.  


“There is a huge misconception about our company. The procurement is actually done by the Ministry of Defense. Our manufacturers sell directly to the military authorities. Everybody usually portrays us (Ukroboronprom) as the intermediary between the actual manufacturers and the client. But this is not so. The second misconception is that we get to decide which part will be kept secret,” Adds Gurak. He is part of a young team working hard to revamp the state arms manufacturer’s image as well as disassemble some of the decades-old stereotypes.


The past two years have been monumental for Ukroboronprom. The state arms manufacturer reports saving of over USD 110 million in the span of two years as a result of effective management decisions and stemming low-level corruption. Trade relations, it seems, have never been better. The company's biggest partner is currently in Saudi Arabia, according to the state arms’ dealer report. Their mutual contracts are worth between USD 300 million to USD 500 million. Another positive impact, Mr.Gurak says, is that the company’s taxes currently make up around 30% of Ukraine’s general revenue.     


While the arms manufacturer may be making some headway, the main issue, highlighted by RAND as well as other organization remains.


Ukraine’s procurement of lethal weapons is kept classified under the State Defense Order. However, the issue there is that one of the most vital aspects of the defense sector during an ongoing war is not accessible to the parliament. Mr. Grant explains why the defense industry needs the legislative changes to declassify some of the aspects of weapons procurement.


“It’s usual that big weapons procurement, even in wartime, is agreed by parliament because it has the say over the money. If you look back at WWII or WWI in Britain you can see that most of the things we were doing were almost completely open. They weren't hidden away. We declared how many warships we were going to build. The secrecy is where and when you use them. The Germans knew we had tanks, what they didn’t know is where we were going to place them and our tactics. Operational secrecy is needed.”


But a number of Ukrainians living in the capital Kyiv see these recommendations to the country’s defense sector as ‘cosmetic changes’; and it’s no wonder. Since the start of the war in 2014, the defense industry has improved drastically. The budget has seen a boost to nearly USD 6 billion, which is almost 5% of the GDP.


This year, many NATO member countries failed to reach the spending requirement of 2% of their GDP, including those with stable economies such as Germany and France while Latvia and Lithuania, who’ve been at the receiving end of Russia’s hybrid war with countless airspace violations and cyber attacks, both reached only 1.5%. In fact, more than 20 members of the military alliance are not meeting the set target, according to this year’s figures.What may be more alarming is that during the US presidential campaign, then candidate and now US president-elect Donald Trump suggested that the US might not come to the rescue of a fellow NATO ally if that country had not reached its defense spending goal.


While many European countries may be debating their stake in the military alliance, Ukraine continues its struggle in a locked military standoff with Russia, a country with three times the population and one of the world’s biggest armies. Revitalizing Ukraine’s defense sector with key reforms and creating an open competition in the business defense system, has never been more vital, since this will bring key foreign investment and the much nmuch-needed flow.    

“The whole war is actually about money,” says Glen Grant, “it’s how you spend the money, how you use the money, and where you place the priorities.”