Colombo Defence Seminar 2018: Surprising appearance of Ukrinmash

Why UKRINMASH is getting a lot of bad press which ignored the gigantic service they have provided during the difficult times in Sri Lanka?  

by C. A. Chandraprema-Sep 2, 2018Sep 2, 2018

Views expressed in this article are author’s own

( September 2, 2018, Colombo, Sri Lanka Guardian) Even though it was the Prime Minister’s comments on the social media made during the keynote address of the Colombo Defence Seminar, that gained the most publicity, the important thing about this international seminar was that one of its co-sponsors was UKRINMASH the Ukrainian arms supplier. If Colombo Defence Seminar 2018 had been held under the Rajapaksa government, there would have been no issue at all in UKRINMASH co-sponsoring anything. However under the yahapalana government UKRINMASH has been one of the most maligned, vilified and investigated foreign companies and even at this moment it features prominently in the investigation into the 2006 MiG deal which was one of the first cases to be taken up by the FCID set up by the present government to probe the financial transactions of the previous government. Quite apart from UKRINMASH being implicated in one of the most high profile criminal investigations, it has also been at the centre of what is undoubtedly the longest standing unresolved corruption allegation in Sri Lanka’s history.

The 2006 purchase of four MiG-27 planes and the overhauling of four other MiG aircraft by UKRINMASH have been dogged by accusations of corruption from the very beginning and the controversy is now 12 years old. The present government has been investigating this transaction for more than three years and up to now, no wrongdoing in relation to the transaction has yet been established. The FCID has been hot on the heels of Udayanga Weeratunga, the former Sri Lankan Ambassador to Russia, who is alleged to have been involved in this transaction and there is a separate sideshow going on with regard to that, with a procession of high officials of the FCID and the Attorney General’s department going to Dubai to get Udayanga Weeratunga extradited but all that is for the purpose of the purported investigation – not because it has been conclusively established that Weeratunga was involved in any kind of wrongdoing with regard to the matter under investigation.

Even though UKRINMASH figures prominently in the police investigation of more than three years into the MiG transaction, it is certainly true that no wrongdoing has been established with regard to UKRINMASH either, and legally speaking, there is no bar to that company sponsoring any event in Sri Lanka or even maintaining a commercial presence here. However, it will certainly come as a surprise to many members of the public that this company which is routinely dragged through the mud by the present government, could be at the same time sponsoring events which has the participation of the Prime Minister and would have had the participation of the President as well if he had not been overseas. Quite apart from what the police have been reporting to courts for more than three years now, the press has been saying some pretty nasty things about UKRINMASH over the years.

For example one of the first newspaper reports to appear about UKRINMASH was in the Sunday Times of December, 2006, under the title “Big fraud and billion-rupee scandal in latest MiG deal”. Among the allegations made in this article were the following:

• The contract for the supply of four MiG-27s and the overhauling of four other MiG aircraft was touted as a government to government deal between the Sri Lanka Air Force and the Ukranian Government-owned firm Ukrinmarsh. However, the contract signed on July 26, 2006, identifies an offshore company, Bellimissa Holdings Limited registered in the United Kingdom, as the Designated Party to which the entire payment including the freight cost would go. (Since UKRINMASH was responsible for designating Belimissa Holdings as the party that was to receive the payment on its behalf, it is guilty of misleading everybody by touting this transaction as a government to government deal while it was actually being transacted through suspicious third parties. Only UKRINMASH could have directed that the payment due to them should be paid to a third party.)
• The MiG-27s in question were left over from a fleet from which the Sri Lanka Air Force carefully selected and purchased seven units in 2000. (Thus UKRINMASH was responsible for palming off leftovers even on a regular customer.)
• The first four MiG-27s bought in 2000 was for US $ 1.75 million each. The other two bought the same year were for US $1.6 million each. A MiG-23 UB trainer was also procured for US $ 900,000 in 2000. However the purchase price of each of the four MiG-27s bought in 2006 cost US$ 2,462,000 each. (Since only the seller can fix prices, UKRINMASH is responsible for unethically jacking up prices in a situation where the goods sold by them in 2006 were exactly the same as the goods sold in 2000.)
• “…the Ukranian Government was unable to come up with a finance package to sell their aircraft that have been lying on the ground for six years. Bellimissa Holdings Ltd., The Sunday Times learnt, is a private company where some Cabinet Ministers in Ukraine are known to have a stake.” (Thus UKRINMASH belongs to a country with a corrupt government.)
• Two of these aircraft were offered to the Air Force by D.S. Alliance Private Limited in May 2000 at a cost of US$ 1.75 million each. The Air Force did not deem it fit to obtain them. But they are now being purchased at a cost of US $ 2,462,000 or by paying a further US$ 712,000 according to documents in possession of The Sunday Times. (Thus UKRINMASH has the rapacious attitude of mind of a used car salesman.)
• The fee for the overhaul of the MiG-23 UB trainer, according to the contract, is US$ 1.1 million… the cost at which the Air Force purchased this trainer in October 2000 was only US$ 900,000. (Yet another instance where UKRINMASH has displayed a profiteering mentality – by charging more for the overhaul than for the original cost of the plane that they themselves supplied to Sri Lanka through their Singapore based agent D.S.Alliance in 2000.)

Selling MiG-27s to a husband and wife dealership

That was how the bad press about UKRINMASH started. (This is of course not to find fault with any newspaper that published such details. All newspapers can present to the public only the details it possesses. If the details in hand seem to point to something that does not look right, then the newspaper publishes it. Those who have details to disprove the newspaper story can then present whatever facts they have. But this process does tend to leave some bruised faces and black eyes around and UKRINMASH has two black eyes and bruises from head to foot as far as Sri Lanka is concerned.) Twelve long years later, there was still no improvement in the kind of press coverage that UKRINMASH was getting in Sri Lanka. For example, the Sunday Times in an article titled “Multimillion dollar MiG deal: Focus on fake contract but real story emerges” dated March 18, 2018 had the following to say about UKRINMASH:

“On a bitterly chilly wintry morning in the Ukranian capital of Kiev last year, an investigation team from the Financial Crimes Investigation Division (FCID) sat down to a conference with officials. Present were the country’s Prosecutor General and top officials of Ukrinmarsh, the state agency that exports military products and related equipment. The FCID team leader, Senior DIG Ravi Waidyalankara, who is the head of the FCID, asked a senior official of Ukrinmarsh about the sale to Sri Lanka of MiG 27 fighter jets and a trainer to the Sri Lanka Air Force. “What sale?” he asked and exhorted “there has been no sale of any MiG-27 aircraft to Sri Lanka from us. There never was.” …Not only did Ukrinmarsh deny selling any MiG 27s to the SLAF at anytime, but the FCID investigations have now revealed that they did so to Bellimissa Holdings Ltd.”

The implication of this is that if any country does business with UKRINMASH, years later, the Ukrainian government is likely to claim that there was never any contract between the two parties. When a government owned entity in one country transacts business with a government owned entity in a foreign country, there should be a cast iron guarantee that the latter country will acknowledge and stand by the contract. Is Ukraine a banana republic where even a government owned entity in that country can have bogus contracts with government owned entities in other sovereign states? Given the manner in which the Ukrainian authorities have reacted to the Sri Lankan investigation it will be extremely risky for any country to buy anything from any Ukrainian government owned entity because they can claim not to have sold anything to that party. The Sunday Times article of March 18, 2018 said that UKRINMASH had not sold any planes to the Sri Lanka Air Force in 2006 but had sold them instead to D.S.Alliance of Singapore. But D.S.Alliance does not use MiG-27s. When they sold the planes, to whom did UKRINMASH issue the End User Certificates for those planes? The Ukrainian authroties don’t seem to have said anything about that. So that makes UKRINMASH a company that should in reality be internationally blacklisted.

According to the police investigation in Sri Lanka, UKRINMASH had sold four MiG-27 planes to a husband and wife dealership in Singapore and they had fully overhauled four more MiG aircraft that had been sent to Ukraine by the same Singaporean husband and wife without knowing who owns those planes or where they were going to after the overhaul. If such was indeed the case, the American Embassy in Colombo should have informed Donald Trump about what UKRINMASH was up to. Any terrorist outfit or rogue state in the world can gain access to sophisticated military hardware from UKRINMASH through the Singaporean husband and wife dealership. If the Sri Lankan police investigation has got it right, then Ukraine should be under UN sanctions. Yet here UKRINMASH is, in Colombo co-sponsoring a Defence Seminar!

That is just a sample of the kind of press coverage that UKRINMASH has been getting in Sri Lanka over the past 12 years or more. The above are allegations that appeared only in one newspaper 12 years apart. The present writer does not agree with the allegations made and has published a contrary view in this newspaper. But that does not take away the fact that UKRINMASH has been getting a lot of bad press in Sri Lanka. In April this year, the ‘Police Correspondent’ of the Economynext website said in a post titled “Sri Lanka’s MiG probe extends to Singapore, Australia“, that the probe into the MiG deal in which UKRINMASH was implicated was to be extended to Singapore and Australia as police listed charges against four foreigners.

The four foreigners to be named as suspects in the case are D.A.Peregudov, the then Director (Chief Executive Officer) of UKRINMASH, M. I. Kuldyrkaev who had signed the contract on behalf of Bellimissa Holdings, the party designated by UKRINMASH to receive the payment, and T.S.Lee and his wife Ng Lay Khim, directors of D. S. Alliance, a regular agent of UKRINMASH who had sold the first seven MiG planes to Sri lanka in 2000. So anybody even remotely connected to UKRINMASH in the past are now to be considered ‘suspects’ in an ongoing police investigation in Sri Lanka. Yet UKRINMASH sponsors the Colombo Defence Seminar and the Prime Minister delivers the keynote speech at this seminar co-sponsored by a company that has figured prominently in an ongoing investigation initiated by his own government.

( C.A.Chandraprema is a political commentator writes for the Sunday Island, weekly newspaper based in Colombo, where a version of this piece first appeared)