Auditors may bankrupt Luch, whose R-360 sank the Russian ship Moskva

The Ukrainian defense company, DerzhKKB Luch, renowned for its design and production of the R-360 Neptune cruise missile, is on the precipice of bankruptcy. Interestingly, this may be an outcome engendered by the Ukrainian state itself. 

Watch the exactly Neptune missile shot that sank the Moskva ship
Photo credit: Wikipedia

DerzhKKB Luch has frequently alerted both the government and the nation’s leading politicians to the declarations and actions of the State Audit Office of Ukraine. This situation has been documented by the Industrial Portal, citing an announcement published by the defense enterprise. 

Intriguingly, the mandate from the State Audit Service of Ukraine [SASU] insists that the company returns its profit, an order that could subsequently halt the production of imperative weaponry for the front line. 

R-360 Neptune manufacturer

DerzhKKB Luch, a distinguished participant in the Ukrainian military-industrial complex, is devoted to the innovation and production of missile weaponry. Its production portfolio is the stuff of legend: Stugna-P [Skyf] and Korsar anti-tank missile systems, Neptune anti-ship missiles [which were instrumental in the decimation of the Russian cruiser Moskva], and the Elsha salvo missile system, to name a few. 

The company asserted, “A scant 10 days following our public notification regarding the incorrectness of the State Audit Office’s conclusions and the associated ramifications, the State Audit Office launched an investigation on September 29 into discrete facets of DerzhKKB Luch’s operations. This includes the incorporation of profit within our product pricing. As is widely known, even before this the State Audit Office sought the Ministry of Defense’s assistance in reclaiming profits derived from the enterprises.” 

Investing in new developments

According to DerzhKKB Luch, the company invests its own operational funding into the development of novel weapons systems, mitigating the after-effects of missile attacks, repairing and substituting damaged equipment and products, moving production sites, and augmenting manufacturing capabilities. 

These working capital are sourced from profits earned, inclusive of those from government contracts. The acceptable amount of profit is spelled out explicitly in Decision No. 363 dated March 3, 2021, which is still exercised.

Either Neptune or S-300F missile sank the Russian cruiser Moscow
Photo credit: Twitter

The rising demand from SASU for a return of profits presents a critical challenge for the company’s operations, calling into question the very survival of the defense-industrial complex. Shockingly enough, this is already the third inspection into the DS amidst martial law, which hinders manpower from product development in the weapons sector, opines the defense firm. 

Reducing bureaucracy

The President and Supreme Commander of the Armed Forces of Ukraine, Volodymyr Zelensky, made a pivotal announcement on September 29, 2023, during the inaugural event of the First International Forum of the Defense Industry. He confirmed that Ukraine is enforcing a specialized economic structure for the defense-industrial complex. 

Denis Shmykhal, the Ukrainian Prime Minister, disclosed that the nation’s Cabinet of Ministers has been meticulously easing the red tape around weaponry production. In addition to this, NATO Secretary General Jens Stoltenberg made it clear in his discourse that it is impracticable to achieve national defense without a thriving defense industry. 

Watch the exactly Neptune missile shot that sank the Moskva ship
Video screenshot April, 13, 2023

Despite the enactment of Resolution No. 10071 on September 21, 2023, by the Verkhovna Rada of Ukraine, which supports the defense-industrial complex during martial law, SASU published on its website an announcement confirming the validity of its action through the adoption of the resolution. 

“The strategy of resource extraction from military and industrial enterprises, employed by SASU, contradicts state policy and threatens to usher in a period of critical repercussions. DerzhKKB Luch is outwardly urging the Verkhovna Rada and the Cabinet Ministers of Ukraine to impose a moratorium on administrative overhauls of defense and military companies, inclusive of audits by SASU, until the cessation of martial law in Ukraine,” is the stand of the firm. 

There are other cases

DerzhKKB Luch is not an isolated case. A parallel situation was discussed at a press conference by the National Association of Defense Industry Enterprises of Ukraine on September 15, 2023. The focus was “The threat to domestic defense production due to the anti-national posture of the State Security Service and law enforcement agencies.” 

The participants vividly discussed the invalidation of the SASU conclusion, necessitating a reversal of already deducted profits from the defensive sector enterprises for the year 2022. 

The considerable stress at the conference was on the fact that such a move might trigger an interruption in production for the front lines, thereby jeopardizing the country’s defense capabilities.

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