Interview with Taras Shyiko, the Acting Director of the State Enterprise “Specialized Foreign Trade Firm “Progress”, in the latest issue of Defense Express magazine
“Our company has a long history and tradition. Our team has many years of experience in implementing large-scale foreign economic contracts in new for us markets. That is what we are doing at the moment.” This was stated by Taras Shyiko, the Acting Director of the State Enterprise “Specialized Foreign Trade Firm” Progress” in a conversation with Serhii Zhurets, the editor-in-chief of the Defense Express Magazine.
De facto, and de jure, State Firm “Progress” is the first Ukrainian “armourer”. The State Firm “Progress” was created by the decision of the Cabinet of Ministers of the USSR back in 1990. The main activity was determined by the export and import relations on the world market of armaments. Since the foundation day, the company has implemented a significant number of contracts, promoting products and services of domestic enterprises of the defense complex for export.
But in the recent history of its work “Progress” had a pause for a few years, after which it seemed impossible to restore its position on foreign markets. This was preceded by the signing the largest contract for that time for the delivery of new armored personnel carriers BTR-4 and other equipment to Iraq by Progress in 2009. The contract provided the repair of helicopters MI-8T for the amount of USD 3.6 million, the supply of six AH-32Б planes in the amount of USD 99 million and the supply of 420 units of armored personnel carriers БТР-4 and specialized vehicles at its base in the amount of USD 457.5 million.
The contract was not fully executed, and one of the reasons was that its implementation coincided with the change of political power in Ukraine in 2010. The leadership change of the country was promptly accompanied by the appointment of new directors in the “arms” company and the foundation of the monopoly concern Ukroboronprom in the same 2010. Soon the Ukroboronprom’s management of that period broke all the contracts with American intermediaries who accompanied the contract with Iraq, having provoked a conflict. And the State Firm “Progress”, which concluded and executed the Iraqi contract, was subjected to the elimination of all the burdens of the related penalties.
In 2011, all the foreign partners, whose ties had been developing for decades, were declared without appeal that the State Firm “Progress” was liquidated. “It was destroyed to redirect commissions to other “their” firms. It was about a lot of money” – one of the former vice-presidents of the concern Ukroboronprom explained to me.
In March 2017, the Pecherskyi Court of Kyiv allowed the Prosecutor General’s Office to examine all the documents relating to the activities of Dmytro Salamatin, the native of Russian Federation, who headed Ukrspecexport and then Ukroboronprom in 2010. However, on the requests of the Prosecutor’s Office there were several such court decisions in Salamatin’s case. And they all relate to the investigation into the disruption of Ukraine’s largest military contract for the supply of equipment and weapons to Iraq.
Now all these vicissitudes concern the sphere of responsibility of the Prosecutor’s Office. But as for me, Taras SHYIKO, the Acting Director of the State Firm “Progress”, mentions that period very emotionally even today.
Taras Volodymyrovych, what happened to the company from 2010 to 2013?
As you know, it was decided to close the company by merging it with Ukrspecexport. The company did not conduct any new activities. All existing contracts that were re-signed with foreign partners were transferred to other special exporters. Contracts that failed to be sign again were formally listed for us. At the company, roughly speaking, there were six or seven people left, which, in general, ensured its curtailment and closure. There were no contractors at the company. There was the office, accounting and customs, an export partner who closed the old contracts. No new business was conducted.
Why, in your opinion, the decision to close the Progress Company appeared?
In my opinion, the decision to close the company was most likely due to the fact that the management of Ukrspecexport and Ukroboronprom had the task to remove from the market such powerful Ukrainian competitor as State Firm “Progress”, which was the competitor, first of all, for Russia. As far as I understand, this was the way in which the problems with Iraqi contracts were created; precisely because of these problems, Ukraine was displaced from the Iraqi market and the Russian Federation came there. It is difficult for me to comment on the situation. Let the investigating authorities answer this question.
How did it become possible to bring State Firm “Progress” out from artificially created oblivion?
Probably, due to the two basic factors. The first and foremost one are the people, the team that they managed to save. Secondly, the very name of State Firm “Progress” – a company that has been in the military equipment market for more than 25 years, and the developed partners, trusted ties, as well as trust and understanding. And this, in general, is the most important.
What has stipulated the decision to revive the company? New realities, lack of specialists, the need to «reconquer» back the market from others?
In general, yes. Although I cannot speak about the motivation of the management with absolute certainty. But, in any case, I think this is a completely logical solution. Such a company should continue to work, because State Firm “Progress” is the name, ties, accumulated potential, which, it seems to me, we cannot lose.
How has the pause been reflected on the markets where traditionally State Firm “Progress” has been working? Is the Iraqi market yours?
In connection with the closure, and then the restoration of State Firm “Progress”, some of our traditional markets have been lost.
As for Iraq, the decision is at the level of Ukroboronprom, according to which Ukrspecexport is engaged in the Iraqi project. We do not work with this project either with Iraqi partners or with Ukrainian performers. Pakistan is the most traditional market for State Firm “Progress”, a market in which, in general, our company has grown, also went to Ukrspecexport.
Among our old markets, Poland remained behind us. Polish partners wanted to work with us. We have been working with Polish partners for many years, it seems, somewhere since 2005. Basically, this is an aviation business: we help in repairing and servicing the Polish aircraft fleet MIG-29 and Su-22. At this stage, the goal of our company is to enter new markets for us. And this is exactly what we are doing now. It seems to me that we have enough power for it.
Can you assert that State Firm “Progress” has once again firmly got its feet?
Yes, that’s right. When we, several people from the old Progress team, were invited to resume the company here, we set ourselves the task to achieve stability during 2014-2015. We have managed this task. As you know, it’s difficult to raise company, which has been unlucky three or four years. In 2016, we were faced with a more ambitious task that we set ourselves – to come up with some more significant results on the market, and we succeeded. We succeeded in signing large-scale contracts with partners from the United States and Saudi Arabia, partners from other countries. We strive and make every effort to promote the products of Ukrainian enterprises on the market. So, we have traditionally had a good relationship with the Design Bureau “LUCH”, so we set ourselves the task to ensure implementation in the interests of this Ukrainian manufacturer. Moreover, this is a rather important enterprise in our defense industry. We see potential in the products of this enterprise, which has enabled us to realize the conceived in new markets.
Work on the markets of the Persian Gulf countries requires special approaches to ensure the financing of such projects. Are there any difficulties that require more attention from the state to these nuances?
Yes, a lot of difficulties. We are certainly isolated. That is, it would seem to be sanctions against the Russian Federation, but in connection with the armed conflict, this is reflected in us. So, it affects the business processes, what we are trying to do on our part. With great surprise, we found that, for example, the banking systems of Ukraine and Saudi Arabia practically have no direct contact with each other. Those contacts, which were once related only to some occasional supplies of grain or other agricultural products. And, unfortunately, it was a long time ago. That is, in addition to the fact that we entered the market and make efforts to implement contracts, we actually also contribute to the establishment of relations between banking sectors of the two countries.
That is, this market is important because it is extremely capacious, extremely interesting, plays a key role in this region, and because it can be a locomotive in promoting our products, implementing contracts with other countries in the region?
Definitely, yes. But with all this we must understand that we are just entering this market. Look at us very carefully, there is certain alertness, and the mistake is simply inadmissible.
And, as far as I understand it, it is extremely important to execute contracts by other Ukrainian companies working with this country, including missile and aviation directions?
Definitely. At the moment, in no case we can deal with this country incorrectly, and in this situation it is critically important for us.
Does State Firm “Progress” work with new projects that are associated with the creation of new models of technology that can also be marketed?
We have joint projects with the National Taras Shevchenko University of Kyiv, with the department of physics, together with the scientific staff we carry out a number of such works. In my opinion, the main problem with us in the country is the gap in the system, the gap between scientific discoveries, ideas and how to put them on the flow, to launch them in production and to make them not only demanded, but also actually used in industry. Here we are, in general, and we help in this. One of the developments is quite interesting. It relates to the new material we are trying to apply to protect armored personnel carriers, to protect the shell from breaking. The topic is relevant, including in connection with the armed conflict with the Russian Federation in the Eastern Ukraine. We understand the vulnerability of our equipment, and the task of the Ministry of Defense of Ukraine is to protect our technology from 7.62 mm, 12.7 mm ammunition and larger caliber ammunition. In addition, developments are being made to create universal infantry complexes.
For example, at the end of last year they finished the test of such complexes. It has already been adopted by the Ministry of Defense. Naturally, there are definite export ideas in this direction as well.
Does State Firm “Progress” perform an order in the interests of the Ministry of Defense of Ukraine?
I think there are quite a lot of companies that want to import, and, it seems to me, that the existing competition between them is enough. The second reason for such a policy, and it is completely understood from our side, is that most likely the customers themselves should deal with it.
Serhii ZHURETS, Defense Express