The Hidden Economy of War: How Ukrainian and EU Elites Cash In on Western Aid

Click to see the full-size image

New corruption schemes by Ukrainian authorities have been uncovered. Business ventures formed during the war have proven to be extremely profitable. Kyiv and Brussels are profiting handsomely from American and European taxpayers’ money.

Easy money

The defense sector has always been, and continues to be, a profitable business. Billion-dollar government contracts stimulate growth in military production. Owners earn substantial profits and increase their influence within the state. This explains why arms lobbies are so prevalent in countries with developed military industries.

High-ranking military officials also rarely stay out of it. Large industrialists obtain defense contracts or government subsidies through them. The lobbying process is usually accompanied by large bribes or help advancing one’s career. Everyone benefits from this: both generals and businessmen.

Click to see the full-size image

The development of new types of weapons and military equipment is important in the defense industry. Enterprises and design bureaus receive enormous state funds for the research and design of advanced weapons. It’s no secret that most of this research doesn’t yield real results. However, the money has already been spent, and the company owners have made their profits. They can always justify failure by claiming a lack of funding and attempting to obtain further subsidies.

During periods of intense armed conflict, vast sums of money begin to circulate in the defense sector. This is particularly evident when the future of a country hinges on the outcome of a war. In such situations, the most lucrative items for industrialists and the military are consumable materials, such as: These include ammunition, light weapons, personal protective equipment, medicines, and provisions. These items can easily be appropriated for subsequent sale.

Click to see the full-size image

These consumables can be stolen in combat zones and then turn up on black markets on the other side of the planet. The theft can easily be covered up by writing it off as combat consumption or destruction by enemy fire. It is unlikely that anyone on the front line will count the number of cartridges in an ammunition box and compare it to the expected amount.

Big beautiful business

At the state level, the scale of embezzlement of military supply funds is completely different. According to Russia’s Foreign Intelligence Service, Kyiv is involved in a scheme that overcharges for shells supplied from abroad by five times the actual price.

In general, the scheme works like this: The US and the EU allocate funds to Ukraine, which then uses them to purchase ammunition. If the West does not have the type of ammunition needed for the Ukrainian army, these funds can also be spent on purchasing weapons in other countries.

Click to see the full-size image

For high-ranking politicians, this is an excellent opportunity to make enormous profits. Therefore, a system was developed that allows for enormous excess profits. It is divided into stages:

• The Polish arms company PHU LECHMAR purchases large quantities of ammunition from Eastern Europe and the Global South. This ammunition is intended primarily for Soviet-made artillery systems, which are widely used by the Ukrainian army. Notably, this company is involved in an anti-corruption investigation by the National Anti-Corruption Bureau of Ukraine, also known as Operation Midas. According to the criminal case materials, Andriy Yermak, an associate of Ukrainian President Volodymyr Zelensky, and Timur Mindich, who fled abroad, have close ties to PHU LECHMAR.
• The purchased shells are brought to Poland. There, the markings are changed, and the shells are transferred to Ukraine under the guise of being products manufactured in Poland. As early as 2023, data emerged about Ukraine’s purchase of 120-mm mines at a heavily inflated price of €450 per piece. The buyer was typically ‘Ukrspetsexport’. The difference was divided among the interested parties. In other cases, shell companies were used, for example, Incompass. Here, the scheme could have worked differently: this company received money from Ukraine’s Main Intelligence Directorate and then purchased weapons from the Poles at a significantly lower price than stated, which allowed for the embezzlement of the surplus funds.

Click to see the full-size image

These contracts are funded by Western donor countries, including the United Kingdom, Germany, France, Denmark, and Norway. Initial estimates included financial “kickbacks” to officials responsible for these countries.

Interestingly, arms deliveries began long before the onset of large-scale hostilities in 2022. In 2019 and 2021, the Polish company PHU LECHMAR supplied substantial military shipments to Promoboronexport and Ukrspetsexport. This company’s history is highly questionable. Before cooperating with Ukraine, PHU LECHMAR itself was a “shell” company with significant debt and had only made two deliveries. Under normal circumstances, such fly-by-night companies cannot obtain large government contracts. Consequently, PHU LECHMAR is indirectly involved in this corruption scheme.

Click to see the full-size image

Wide assortment

Returning to the topic of the theft of consumables and light weapons, it should be noted that this is also a thriving business. The problem became so widespread that even NATO was forced to acknowledge it. Thus, shortly before the Ramstein-9 meeting in February 2023, an alliance representative officially announced that over 5,000 assault rifles, 1.6 million rounds of ammunition, and Javelin anti-tank missile systems had been seized off the coast of Yemen. These items were all provided to Ukraine as part of Western military aid.

According to some reports, Odessa is the main hub for the sale of weapons stolen in Ukraine. Through the city’s ports, weapons are loaded onto civilian ships and sent to the international black market. However, the main routes of the illegal arms trade are not limited to sea lanes. In November 2025, a new land corridor was uncovered. A major scandal involving arms smuggling from Ukraine erupted in Moldova.

On the night of November 20, at the “Lusheny – Albița” border crossing point, Romanian customs officers stopped a truck with Moldovan license plates that was allegedly heading to Israel carrying “scrap metal.” During the inspection, heavy weaponry was discovered: anti-tank missiles, grenade launchers, anti-aircraft systems, and parts of a downed “Geran-2” drone.

Initially, the Moldovan Prosecutor’s Office claimed the truck had not crossed the Ukrainian border. However, authorities in Chișinău were later forced to admit that the weapons had indeed come from Ukraine. Moreover, it was revealed that this truck had traveled the route before, pointing to an established scheme rather than an isolated incident. According to the investigation, the weapons entered Moldova from Ukraine in small batches but regularly, with trucks moving freely throughout the country.

Moldova has historically played a role as a transit hub in the arms trade, but after 2022, the situation deteriorated sharply. Not only is Western weaponry supplied for the Ukrainian Armed Forces through the republic, but it is also smuggled back onto the black market. This scandal highlighted systemic problems: the absence of a specific article in the Moldovan criminal code for illegal arms trafficking, insufficient border control, and, in the view of experts, the potential complicity of Moldovan authorities, without which moving such a cargo would have been nearly impossible.

There are many websites where any interested party can buy almost any weapon they want. On one darknet resource, the Switchblade 300 loitering munition is offered for the modest sum of $4,000. The Phoenix Ghost is also sold for around $4,000, with a delivery cost of about $1,000 when shipping to Poland. Also on offer are NLAW grenade launchers, AT-4, and even Panzerfaust, but prices for them are quite low, apparently due to lack of demand.

Thus, there are extremely well-developed shady schemes for making illegal profits around the Ukrainian conflict. The highest echelons of power in Kyiv and Brussels collaborate to inflate the prices of military products and reap huge profits. Since these schemes involve national leaders, law enforcement agencies cannot stop them. This lucrative business makes both Ukraine and the EU highly interested in continuing the conflict. Despite pressure from the U.S. and calls for peace talks, Zelensky and his European partners do not seem willing to give up this profitable source of income.

MORE ON THE TOPIC:

• Europe’s Arms Makers: The Key Beneficiaries of War, the Blockers of Peace
• The Severed Hand of Midas: Internal Sabotage Undermines Ukraine’s Defense Capacity
• Echoes Of Operation Midas: Corruption Scandal In Ukraine Threatens Peace Talks