Wednesday06 November 2024
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"Drone army and kickbacks?" How to earn nearly 600 million UAH from drone purchases for Defense Forces, and what’s Fedorov’s role in it?

You can find numerous videos and photos online featuring the Minister of Digital Transformation, Mikhail Fedorov, and the former head of State Special Communications, Yuri Shchigol, boasting about the transfer of drones to the Ukrainian Armed Forces.
«Дроны и откаты?» Как заработать почти 600 млн грн на покупке дронов для Сил обороны и какое отношение к этому имеет Федоров.
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Prices — Twice the Market Rate

The company "Kryon-M," according to YouControl data, has a charter capital of 765 hryvnias. It specializes in trading furniture, carpets, lamps, etc. Its office is located in a private sector area near Kryvyi Rih.

The head and beneficiary of the company is a certain 43-year-old Maksym Sazhnev. The man has registered an individual entrepreneur under the activity code related to "Architecture activities," as well as a company called "TERRA NOVA KR," which specializes in real estate rental.

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However, last year "Kryon-M" suddenly began selling drones to the State Service of Special Communications and Information Protection. There was no direct and transparent tender, meaning that offers were provided by those companies invited by the State Service itself. These supplies were part of a joint project with the Ministry of Digital Transformation called "Army of Drones."

Since July 2023, "Kryon-M" has sold almost 3,900 drones to the government for approximately one and a half billion hryvnias.

Initially, one drone purchased from "Kryon-M" cost the State Service almost 500 thousand hryvnias, even though the same drones could be bought for half the price (more on that later).

Nevertheless, the exorbitant prices of "Kryon-M" did not prevent the State Service from signing two contracts with them. Under the first contract, signed in May 2023, the company supplied 1,074 drones. Under the second contract, signed in August of the same year, the state received 1,912 "birds."

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In July 2023, the government adopted a resolution allowing manufacturers to include up to 25% profit in contracts with the state. Additionally, since "Kryon-M" is not a manufacturer, there is another nuance: this 25% profit should have been calculated based on the cost price of the drones. The markup of all participants in this supply chain clearly exceeds 25%.

Perhaps someone suspected something was amiss, or the State Service decided to conceal inflated prices and adjust the numbers to fit the 25% resolution.

However, the fact remains: for the first contract, "Kryon-M" supplied 1,074 drones at exorbitant prices, and later delivered another 402 drones at reduced prices. The delivery occurred under an additional agreement signed in February 2024. Therefore, the average price per contract dropped from 498,071 UAH per drone to 359,631 UAH.

Under the second contract, 1,912 drones were supplied at full price, and later an additional 488 units were added at a reduced price. Thus, the average cost fell to 393,576 hryvnias. This additional supply occurred under an agreement signed in November 2023.

But where "Kryon-M" obtained the drones at reduced prices and what those prices actually were remains unknown.

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Regardless of the initial price "Kryon-M" quoted — around 500 thousand hryvnias initially or 359 thousand and 393 thousand later with reduced prices — it's still too much.

The company explained that prices are high, in part due to the configuration: along with the drone and battery, an additional battery was included (noting that retail prices for such batteries sell for about 15 thousand hryvnias).

The volunteer "Sergiy Prytula Fund" purchased such drones in June 2023 with one battery for 280 thousand hryvnias. In August, they were buying them for just 212 thousand each.

Even state institutions in 2023 were acquiring those same Autel drones at much lower prices. The Zhytomyr City Council bought them for 287 thousand each. One of the communal enterprises in Lviv purchased them for 269 thousand hryvnias. Not 359 thousand, as after the price reduction at "Kryon-M," and certainly not 500 thousand, as it was initially.

The cherry on top is the Ukrainian company Flytechnology, which directly collaborates with the manufacturer Autel, offering the State Service wholesale batches of the same drones for 212.5 thousand hryvnias each in the fall of 2023. The same price was available from the company in June 2023. However, for some reason, a contract was never signed with them.

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One could continue to compare "Kryon-M's" prices with market rates, but the essence is simple. They are higher. We propose to calculate just how much.

Taking the final prices that the company reduced through additional drone supplies, we will compare them with the offer from Flytechnology — 212.5 thousand per drone. We will also add the cost of an additional battery — 15 thousand hryvnias.

This means that on the contract signed in May 2023 between the State Service and "Kryon-M," they "made" almost 200 million hryvnias, and on the contract signed in August 2023, another nearly 400 million.

With these almost 600 million it would have been possible to buy another 2,600 such Autel drones with an additional battery for each. Or 2,000 pickups for the Armed Forces. Or four Bayraktars. Or 70 mobile command points to strengthen air defense.

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A German Company with Ukrainian Roots

No less interesting are the supply chains of these Autel drones, as "Kryon-M" was not the only player involved. The drones sold to the state at inflated prices were purchased by the Ukrainian LLC from European companies — the Polish UMO and the German Danator.

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The Polish UMO has long been active in the arms market. However, it truly began to profit during the full-scale invasion of Russia into Ukraine. In 2022, its profits increased nearly 15 times compared to 2021.

On September 28, 2023, "Kryon-M" purchased 912 Autel drones from the Poles for nearly 447 million hryvnias. Thus, the price of one set reached almost 490 thousand hryvnias at the then exchange rate.

For comparison: the official European distributor of Autel in September 2023 sold the same drones for 280.5 thousand hryvnias. Moreover, these are retail prices, which are usually somewhat higher than wholesale prices.

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We attempted to contact representatives of UMO to find out the source of the 200 thousand hryvnias price difference. They did not respond to our inquiries. Meanwhile, "Kryon-M," which purchased drones from the Poles, claims they did not disclose either the supply chains or the initial cost of the goods.

The second company from which "Kryon-M" purchased drones — the German Danator — deserves special attention, as there is not much German in it. The firm was registered in 2023 in a small German town called Kirchberg. The founder is a Ukrainian named Serhiy Velychuk, who still manages the company today.

Before 2020, Velychuk worked at the state enterprise "Spetstekhnoeksport," which specializes in the export and import of goods for the defense industry. Prior to that, he was an employee of the Kyiv Prosecutor's Office. Even earlier, at least since 2010, he worked at the Ministry of Internal Affairs.

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"Kryon-M" purchased drones from Serhiy Velychuk's company at already inflated prices. In July 2023, they bought 532 drones for 6 million 240 thousand euros. This equates to 11,730 euros each, which at the then exchange rate is about 487 thousand hryvnias.

As a reminder, the "Prytula Fund" purchased the same drones the following month, in August 2023, for 212 thousand. More than twice as cheap.

So why did the Ukrainian-German company have such prices?

"What do you want me to say? What is this, a kindergarten?" — Velychuk responded to our request to name the price at which Danator purchased the drones.

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According to the businessman, his drones have some special firmware, which is why they are expensive. He claims the firmware cost around 2 thousand. Dollars or euros — Velychuk does not remember.

Typically, Ukrainian military personnel reflash Autel drones themselves — and this is free. But perhaps Serhiy Velychuk invented some advanced technology that simply has no analogs.

To clarify this, we found a drone from the batch that Danator sold to "Kryon-M." It has the "Army of Drones" marking and the corresponding serial number.

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