Just weeks after being appointed as Ukraine’s new Minister of Strategic Industries in late July, Oleh Uruskiy, 57, became one of the country’s most influential power brokers.
Uruskiy is in charge of the national aerospace and defense sectors, which are of top importance amid the ongoing proxy war with Russia. In present-day Ukraine, this means having lots of strings to pull regarding national security matters and a crucial say on the future of the country’s giant military industry.
On paper, Uruskiy’s newly-created Ministry for Strategic Industries was meant to turn around Ukraine’s declining defense production, which has been devastated by endemic corruption.
But it seems to have become yet another bureaucratic construct with broad powers.
Six months after his appointment as a deputy prime minister and minister for strategic industries, Uruskiy found himself buried under an avalanche of criticism from anti-graft watchdogs and reform advocates. He was accused of taking direct control over the defense industry and its financial flows, of non-transparent appointments — and most importantly, of trying to derail the long-suffering reform of defense production giant UkrOboronProm.
For many in the defense community, Uruskiy has become the symbol of the post-Soviet bureaucracy which is threatening to finish what remains of Ukraine’s once-glorious defense industry.
However, Uruskiy, who had worked in state agencies for years before taking over the Minister of Strategic Industries, doesn’t think so.
According to him, UkrOboronProm reform is alive and will be completed as planned, despite numerous scandals.
In his words, he does not intend to clamp down on the country’s top enterprises, such as the legendary aircraft manufacturer Antonov, or the Pivdenne space design bureau.
He assures that his ministry is only around to regulate the industry and formulate a state defense procurement program. The ministry’s control of the industry’s largest enterprises creates no corruption risks, according to him.
“I don’t see any conflicts of interest at all,” Uruskiy says.
“Everyone is going to have certain mandates and tasks: the ministry develops policies, while (state defense production) companies execute them and do business.”
Aivaras Abromavicius, the director-general of Ukraine’s state-run defense production giant UkrOboronProm, delivers a speech during a celebration ceremony at the Antonov airfield in the town of Hostomel near Kyiv on Oct. 18, 2019. (Kostyantyn Chernichkin)
Conflict with UkrOboronProm
Almost immediately after the ministry’s inception, Uruskiy clashed with UkrOboronProm’s top management team created by Aivaras Abromavicius, then director-general of UkrOboronProm.
Abromavicius and his team advocated the reform of UkrOboronProm that would see the conglomerate divided into several stand-alone corporate holding companies to make it more effective and reduce the risks of corruption.
Months of tension between the management of UkrOboronProm and the new minister resulted in UkrOboronProm rolling out a headline-grabbing statement accusing Uruskiy of blocking the reform and interfering in the concern’s business “starting from day one.”
“We agreed (to working with the Ministry of Strategic Industries) in the hope of finding partners and like-minded reformers” as the corporation’s deputy director-general Mustafa Nayyem asserted on Nov. 18.
“Instead of partnership, we faced systemic protraction in the development of strategic documents, the blocking of our draft bill, and the reform as a whole.”
Uruskiy denies using any illegal pressure on the concern’s management but says that he was forced “to start discussions about the top management” after he visited UkrOboronProm’s enterprises and saw them “in a terrible condition.”
Uruskiy accuses the concern’s previous leadership of being “out of touch with life.”
“They wanted many of UkrOboronProm’s functions to be left out of the ministry’s control,” he says. “We did not agree with that. Because when it comes to transferring large amounts of public properties between enterprises, I see the lack of control by a central government agency as unacceptable.”
In early December, UkrOboronProm’s acting director-general Ihor Fomenko, former deputy of Abromavicius, was replaced by Yuriy Husyev. Uruskiy and Husyev say they are mostly on the same page when it comes to the future of UkrOboronProm.
Ukrainian Deputy Prime Minister and Minister of Strategic Industries Oleh Uruskiy talks to the Kyiv Post at the Cabinet of Ministers on Dec. 30, 2020. (Anton Mikhnenko)
Reform ahead
The new reform plan envisages two major holding companies — the Defense Systems of Ukraine and the Aerospace Systems of Ukraine — to be created within the next few years.
UkrOboronProm is still slated for elimination.
Defense Systems will control nearly 60 former UkrOboronProm enterprises divided into several specialized clusters producing military-grade hardware. Meanwhile, Aerospace Systems will take over predominantly civilian aircraft, engine, and space vehicle manufacturing.
Uruskiy’s ministry intends to stand above them, shaping policy, rules, strategies, and the “business atmosphere.” The holding companies would use the rules set down by the Organization for Economic Co-operation and Development: They’d be governed by independent supervisory boards, with 100% of their shares belonging to the government.
The ministry plans to have a big role in their business activities and hiring policies.
Uruskiy wants his representatives to be involved in the boards’ work. The ministry would have a say “in the final approval of contracts and top management candidates.”
“Most likely, director-generals will be appointed with the ministry’s approval,” he said.
Apart from that, Uruskiy confirmed he intended to take the so-called special export companies, such as UkrSpetsEksport, away from UkrOboronProm — yet another controversial point in the ordeal.
Having exclusive rights on foreign arms deals, the special exporters are the concern’s most money-making affiliates making nearly $908 million in 2019 alone, which is nearly 70% of the corporation’s annual revenue.
In the future, Ukrainian defense producers will be entitled to obtain licenses and enter foreign markets on their own, he adds. The special exporters would have to become history — but for the duration of a “transitional period,” Uruskiy’s ministry wants to take them under its control.
Deputy Prime Minister Oleh Uruskiy (R) visits a defense production plant in Zaporizhia on Aug. 3, 2020. (The Cabinet of Ministers of Ukraine)
Acquisition programs
Throughout most of 2020, media and watchdogs fiercely criticized Uruskiy, the Defense Ministry, and the government for failing to fulfill the country’s Hr 25.5 billion military acquisition plan, which was only 73% completed in November.
Besides, a range of milestone contracts to produce new hardware for the military, such as the Neptune cruise missiles and Antonov An-178 aircraft, were signed under severe public pressure literally in the final hours of 2020.
While insisting that the country’s defense procurement program was 100% complete in 2020, he blames the lack of a systemic approach towards shaping the defense acquisition.
Numerous critics call Uruskiy one of the biggest troublemakers for the defense procurement program for 2021.
As far back as in July, parliament finally passed a long-awaited bill introducing new, more transparent, and effective principles of defense procurement, which was expected to enter full force starting in 2021.
But watchdogs say, both the Ministry of Defense and the Ministry of Strategic Industries failed to pass all necessary statutory regulations by the end of 2020 needed to synchronize their practices with the new legislation.
According to critics, this effectively blocked the introduction of new principles in 2021 and jeopardized this year’s whole defense procurement program.
Uruskiy strongly denied all accusations, saying that his ministry still has time to pass all necessary acts by Feb. 14, 2021. He said ten of these acts are now being agreed on in the government, including three that are crucial for the 2021 defense procurement program.
“Hopefully, we’ll see them passed in January,” he said.
Ukrainian Deputy Prime Minister and Minister of Strategic Industries Oleh Uruskiy talks to the Kyiv Post at the Cabinet of Ministers on Dec. 30, 2020. (Anton Mikhnenko)
A ministry no different
Watchdogs and analysts still question the ministry’s basics.
For much of the time since its inception in July, the ministry basically had only five officials — Uruskiy himself and his deputies. It had no reform strategy, almost no legal basis, no approved staff list, and no office.
Meanwhile, it was taking charge of the country’s most important state-run industries, with a final say over the UkrOboronProm reform.
This raised many eyebrows.
Uruskiy responds to critics by saying that his ministry has already been established as a full-fledged government agency and, got the right to employ up to 333 staff members, and a Hr 2.7 billion ($98.6 million) budget for 2021 and access to classified information.
But even now, the ministry has no website and communicates with the public mostly via its Facebook page.
In November, despite still being barely functional, the ministry started an Hr 2.7 million ($95,000) tender to buy three cars, according to State Watch.
Uruskiy said there was nothing strange about such an early procurement. The ministry needs vehicles for its everyday activities and meetings with foreign delegations.
“(The vehicles) cost no more than Hr 900,000 apiece….and if we consider all our ministries, we’re no different,” he says. “Three cars for 333 personnel is just nothing.”
