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Ukraine to liquidate its state defense company after corruption scandal

Officials want to "eliminate the obscolete management system" and at the same time preserve the enterprises that worked efficiently

KIEV, April 29. /TASS/. The National Security and Defense Council of Ukraine has supported the initiative to liquidate the Ukroboronprom state defense concern and replace it with a state agency with broader powers, the council’s deputy chairman Sergei Krivonos has said.

According to a bill, submitted to the country’s unicameral parliament Verkhovna Rada on April 24, the concern and its enterprises have become inefficient. This, in turn, resulted in poor investment prospects, disruptions of weapons supplies for the country’s armed forces and power abuse by some of its officials.

"A separate state agency with broad powers will be set up, to which members of the concern will be subordinate. In line with the new bill, a great number of existing firms acting as intermediaries will be liquidated," the official said in a statement published on the council’s official website.

The deputy council chairman believes that the bill would help to "eliminate the obscolete management system" and at the same time preserve the enterprises that worked efficiently.

Ukroboronprom was created as a result of the 2010 administrative reform and comprises more than a hundred defense industry enterprises - 125 state-run firms and nine joint stock companies.

The scandal surrounding Ukroboronprom broke out three weeks ahead of the first round of the presidential election in Ukraine. A journalist investigation revealed that shadow schemes were used in the defense sphere, making it possible for the country's defense enterprises to charge an arm and a leg for supplying parts from Ukrainian military depots and some parts allegedly from Russia through rogue firms with participation of senior officials. That said, officials close to Ukrainian President Pyotr Poroshenko took part in corruption deals, in particular Igor Gladkovsky, a son of First Deputy Secretary of the National Security and Defense Council Oleg Gladkovsky. The journalists also accused the State Fiscal Service of Ukraine, military prosecutors and the National Anti-Corruption Bureau (NABU) of being involved in Ukroboronprom corruption schemes.

In the conditions of the approaching presidential election Poroshenko urgently dismissed Oleg Gladkovsky and even suggested introducing NATO representatives as members of the supervisory council of Ukroboronprom. At the same time Ukroboronprom’s management removed the directors of two enterprises - Director of Kharkov Morozov Machine Building Design Bureau Alexei Babich and Director of Izyum Instrument Engineering Plant Sergei Filonenko. NABU launched criminal cases against some officials. NABU head Artyom Sytnik said that total losses from corruption schemes in the military-industrial complex were about 1 billion hryvnias ($37.8 million).

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