Continuation of the interview of the General Director of “Ukrainian Armor” company for the news agency “Defense-Industry Courier”, link to the source.
Design and Manufacturing Company “Ukrainian Armor” came as a surprise to many during the International Exhibition “Arms and Security – 2021”. In particular, despite its humble background (its activity in the market of defense products began in 2015), the company comes up with numerous cutting-edge developments.
This aspect of the private company’s activities became the key point during the talk between the Defense Industry Courier agency reporters and Vladyslav Belbas, Director General of Ukrainian Armor.
Vladyslav Volodymyrovych, we have recently talked before the “Arms and Security – 2021” exhibition. However, Ukrainian Armor became such a bright event, that it was impossible to miss it. How do you estimate the company’s presentation at the exhibition?
We have been very active for the last two years, so we had much to demonstrate. Our company was really notable for its scale. It is worth mentioning that “Arms and Security – 2021” exhibition, as well as any other armament forum, is a unique opportunity for each company to present its own achievements to potential contractors, end-users, and the general public. We showed a few promising examples of modern armor for the first time. The armored vehicle called Novator with a 12.7 mm NSVT combat module (with the possibility of modification to install a Browning M2 machine gun) is among them. Such a combat module transfers the Novator into the category of front-line armored wheeled combat vehicles with full functionality of both offensive and defensive nature. It provides a full-capacity fire support of armored infantry units for the linear defense or air assault troops during offensive operations. Moreover, it is also possible to use the vehicle at security checkpoints. With added 12.7 mm module, Novator falls into wheeled armored fighting vehicles.
Another area of our efforts is the development of modern weaponry by combining our wheeled base with developed systems. These are already high-tech complexes of different functionality: reconnaissance and suppression of enemy facilities, as well as development of strike platforms. As you know, at the exhibition we also presented for the first time a new reconnaissance strike unmanned aerial vehicle (UAV) RAM II – also based on the Novator armored vehicle. This is a high-precision strike loitering drone designed to attack against hostile forces and minimize collateral damage when used in urban areas at distances of up to 30 kilometers.
We are very pleased with the level of interest in these developments, and have held many talks. To be honest, we have expected more interest and initiative from the MOD of Ukraine regarding the exhibition as a whole.
I would like to mention one more event. At the “Arms and Security-2021” exhibition we officially presented NAUDI – the National Association of Ukrainian Defense Industries, uniting territorial and branch organizations of defense industry employers. Founded in 2020, NAUDI aims to consolidate promising Ukrainian manufacturers of military equipment, weapons and ammunition. After all, before the Russian armed aggression against Ukraine, our country had almost no private companies that developed and manufactured military equipment and armor. As of today, about 60% of the state defense orders are fulfilled by private companies of the defense industry complex. But at the same time domestic enterprises still remain in unequal conditions with the state ones. Moreover, it included unequal conditions with foreign companies.
So we can state that the foreign armor import is critical for the Ukrainian defense industry. Clearly, there are world trends and technologies, we have much to learn from, but I consider it wrong to order or purchase foreign military equipment that Ukraine is able to manufacture by its own. To supply their products to state customers a Ukrainian manufacturer shall undergo three years of state tests, prepare and approve accounting and calculation materials, complete a full range of inspections, and spend much money. But the imported analog can pass all procedures, without any comparisons or tests. Also, as a matter of fact, by purchasing armor from foreign countries, we do not balance the trade and do not develop domestic technologies.
That is precisely why the NAUDI was established – to protect the interests of the Ukrainian manufacturer, coordination and cooperation with state customers. Besides, this association should allow defense enterprises to promptly receive information about the needs of the sector and fulfill urgent tasks faced by the state security agencies. After all, we have to provide the Ukrainian army with modern high-tech weaponry.
However, the company did not limit itself to a demonstration of exclusively new models. In particular, “Ukrainian Armor” presented a line of mortars, with a self-propelled one, MRAP vehicle Varta…
So, we rapidly develop artillery systems. The war in the east for seven years was actually an artillery confrontation. We got mobilized for adequate developments, and the existing problems with the Molot mortar urged our motivation. Besides, UPIK-82 mortars and the 60mm MP-60 mortars turned out to be a success. UPIK-82 was developed in three years and after state tests, it was adopted by the Ukrainian Armed Forces. The MP-60 mortar is approved for a special period. Besides, the company has also developed for possible serial production 81 mm UB-81 mortars to NATO standards, as well as 60 mm mortar rounds. We are still developing rounds for 82 mm and 120 mm mortars.
Therefore, having a wide range of achievements, our team took up the development of the Smereka self-propelled two-caliber mobile mortar system. By the way, it is the only one out of dozens of developments ordered by the Ministry of Defense as a development project. The Smereka is a project with a large-scale digitalization and integration into modern systems of armament control, financed by the state. It confirms recognition of our potential by the customers. The mortar is now completing the second stage of development work. It had a tremendous success at the exhibition. Let me add that we are constructing a fully domestic system: this is technology, not imported. It integrates very complex technical solutions. As a result of the increased complexity of this development project, it took more time than we and the customer expected. The test results and developed technologies obtained are top-secret. But open demonstration of development project results can ensure the return of spent resources by the state as a result of the transformation of interest of potential customers in export contracts. Moreover, we expect that the state will purchase our, Ukrainian mortars, rather than import them.
Could the visitors of the “Ukrainian Armor” display see ZU-23-2? Tell us about this development.
We were able to localize the manufacturing of this popular armor. Now the 23 mm anti-aircraft twin-barreled autocannon 2A13, also known as ZU-23-2, is undergoing state testing at the State Research Institute for Testing and Certification of Armaments and Military Equipment. We mean the Ukrainian modification of ZU-23-2 and it is to be adopted for service in the Armed Forces of Ukraine.
The manufacture of the whole nomenclature of units is being developed in parallel with the tests. It will make it possible to repair existing ZU-23-2 units and manufacture them in the future. (editor’s note Earlier in Ukraine local manufacturing of 2A14 to ZU-23 barrels by the state enterprise KB Artillery Armament, and KBA 40 was better than the Soviet-made ones in terms of its tactical and technical characteristics according to the test results). We are going to execute both internal and external orders. We are familiar with the market, all the documentation has been developed, in fact, we just have to finalize the automatic loader, which is the most complex element of the anti-aircraft unit.
Now we plan to complete the state tests, I guess, in one or two months. We have a number of previous orders, which will become real contracts, as this type of armor is very popular on the market. The total potential of orders is over 500 units.
The “Ukrainian Armor” has had a special exporter’s license since 2019. Did you use it at least once?
As of today we have two foreign economic contracts concluded independently and two – through special exporters. One procurement contract is for Varta MRAP. Another one is for the Vartas and Novators. The contracts concluded through special exporters are for procurement of ZU-23-2 anti-aircraft units.
The company launched marketing activities in 2016. We mean the markets of Africa, Asia, and Latin America. We are active participants in the world-level armament forums: Turkey, Peru, Great Britain, France, Egypt and the UAE. The “Ukrainian Armor” participates in tenders, constantly holds presentations for end users and invites to visit its manufacturing site. For example, last year delegations from Senegal, Egypt, Morocco, Afghanistan and Indonesia visited Ukrainian Armor. Interest in our developments is gradually but steadily growing.
Is it a problem for you to work on your own? Do you have your own marketing department? And as for the dual right of export, can you work both with a special exporter and on your own?
In general, it is easy for our team to work independently in the market, so it would be interesting. We have a trained team familiar with technologies and target markets. In general, I am for the state to follow the path of Bulgaria – to the complete market liberalization. There are still state-owned special exporters in Bulgaria, there are also many private exporters. To become an exporter, you shall have a Bulgarian citizen as the founder of the company and pass a test of knowledge in the rules of export control of weapons and military equipment, dual-use equipment. And there are public and private plants. They sell the vast majority of their products through private companies. At the same time, state special exporters sell a lot and have representations in many countries. Moreover, through financial instruments, possible advance payments for deliveries, they even cooperate with Ukrainian manufacturers.
Would you be interested in becoming a private special exporter to provide brokerage services?
Yes. The global market is very dynamic, and companies that act quickly become successful. Bulgarians have a wide experience in the ammunition trade – all over the world. Even Americans buy their equipment. Everyone in this country can get a license. Plants can trade on their own, although they can choose a special exporter’s services. By the way, private special-purpose companies act as intermediaries. They also have a state holding company. They manage to sell not only Bulgarian products but also Ukrainian or manufactured in other countries. Special exporters are considered as a good mechanism, as the business is based on the world market environment. And this is one of the current mechanisms to ensure bank guarantees. Currently, we do not have enough companies that are able to issue bank guarantees and work with letters of credit. It means cooperation of a supplier, a buyer and a financing party. It can be a company with investment plans. That is why I am in favor of complete market liberalization – it provides more opportunities. Incompetent players will drop out themselves.
What can you say about the company’s participation in the project to develop a modern car to replace the Soviet car UAZ?
Our team is highly motivated. Upon receipt of the request in November 2020, it was obvious that of all available SUVs, only the Mitsubishi L200 is suitable for all parameters. Many countries decide on a similar Ford Ranger. When the Ministry of Defense sent operational and tactical requirements (OTR) to the vehicle, we responded. After a series of meetings, the military department announced the future of the development project, and on May 21, potential participants were given a Tactical Terms of Reference. They are very different from what we had in 2020, and are somewhat contradictory, but we understand that the military is trying to get something much better than UAZ. For example, a ground clearance of 300 mm will suit Land Rover, Defender, and Toyota Land Cruiser. However, these will be vehicles of a completely different price segment, much more expensive.
As for the future vehicle, the military wants manufacturing to be localized. The team of the “Ukrainian Armor” is ready for this – we have already accumulated considerable experience in organizing the manufacture of Varta and Novator. We hope for a transparent, competitive procurement so that the products presented by the participants can be compared. As for the price, ours is the best, I think. Our company will preserve this tradition for this project.
The main thing we expect is the sequence of the customer’s actions. We already know similar stories. For example, in 2017, the “Ukrainian Armor” signed a joint decision with the Ministry of Defense of Ukraine to develop a new infantry fighting vehicle. The development project under “Vartovyi” code should replace the BMP-2. We envisioned that the BMP-V, that is, a floating tracked armored vehicle, would allow to transport 10 people with the crew, would have a maximum speed of 60 km/h and weigh up to 25 tons. The BMP-V combat module included a 30-mm automatic gun, a 30-mm or 40-mm automatic grenade launcher, a 7.62-mm machine gun, and the Barrier-212 anti-RPG. Our company developed a preliminary project and submitted it to the Ministry of Defense. A number of Ukrainian companies, both public and private, have joined this project. However, the project was suspended by the Ministry of Defense for unknown reasons. Despite the huge need for such vehicles…
In spring, some media reported that in 2020 the company suffered significant losses. Can you comment?
Indeed, we finished last year with negative financial results. It resulted from unpredictability of the state as our main customer. Of course, like any business, we are looking for additional opportunities in foreign markets. However, in conditions when our priority is to provide modern armaments to the Ukrainian army, and we, as the executor, do not have any forecasts regarding the nomenclature of SDO, it is extremely difficult to work. I hope that the situation will change for the better, and all players in the armaments market will be able to supply their best developments on a competitive basis and, thus, help save the lives of our military.
Here is your business, you are developing. There are modern technologies. What would you like from the state to develop these technologies faster? Would it be profitable for you to be a subcontractor or, for example, to join a holding company?
I am not sure that Ukroboronprom is heading for a breakthrough result – I do not see any signs of that yet. Today there is a clear view of the “Ukrainian Armor” company on development. How should it be implemented? It is possible to repeat the example of the Neptune missile system. In terms of wheelbase design and armoring, our company was very quick to perform this work. I am always in favor of simplifying the relationship. I prefer simple relationships. I think there will always be differences of opinion in the consortium. For example, the Head of Luch, Oleh Korosteliov, is a brilliant manager – he manages to connect the nativities of a dozen supplier companies. He perfectly understands the production schedules and nuances of operation at Ukrainian enterprises. I am not sure that there are any other top professionals in Ukroboronprom. The management is constantly changing, and it takes some time to understand the market details. Therefore, I don’t see us as a holding company part.
Let me rephrase: would you enter into an agreement with a special exporter who would invest in the development and become a co-owner of a new, joint product?
I think, yes. We are ready to cooperate with various companies, including Ukroboronprom holding companies. That is, you should transfer, share and sell technologies all the time. You can’t slow down, especially in our industry. You have to sell developments and create new products and services. As soon as we stop, we will have to leave the market because of strong competitors.
For example, forward contracts, when the Ministry of Defense conditionally agrees to supply the company with 200 vehicles to replace the UAZ, with the characteristics that your vehicle will confirm?
In our country, it is impossible by law. Such contracts require refinement of the regulatory framework. But we would be happy to make such a move. We are ready for any form of legal cooperation.
Well, if, for example, you are going to make a new vehicle as part of a state defense order, you have two options: invest money yourself in the preparation of manufacture or, for example, the company “Bezpeka” will supply you with everything you need for the manufacture but will get a certain percentage of the future product. Are you interested?
Certainly. But again, one of the central problems in Ukraine is the regulatory framework.