WCW Home News Recent News 7/7/21 Documents Reveal Erik Prince's $10 Billion Plan to Make Weapons and Create a Private Army in Ukraine
7/7/21 Documents Reveal Erik Prince's $10 Billion Plan to Make Weapons and Create a Private Army in Ukraine PDF Print E-mail

By Simon Shuster

From Time | Original Article

Kyiv/On the second night of his visit to Kyiv, Erik Prince had a dinner date on his agenda. A few of his Ukrainian associates had arranged to meet the American billionaire at the Vodka Grill that evening, Feb. 23, 2020. The choice of venue seemed unusual. The Vodka Grill, a since-defunct nightclub next to a KFC franchise in a rough part of town, rarely saw patrons as powerful as Prince.

As the party got seated inside a private karaoke room on the second floor, Igor Novikov, who was then a top adviser to Ukraine’s President, remembers feeling a little nervous. He had done some reading about Blackwater, the private military company Prince had founded in 1997, and he knew about the massacre its troops had perpetrated during the U.S. war in Iraq. Coming face to face that night with the world’s most prominent soldier of fortune, Novikov remembers thinking: “What does this guy want from us?”

It soon became clear that Prince wanted a lot from Ukraine. According to interviews with close associates and confidential documents detailing his ambitions, Prince hoped to hire Ukraine’s combat veterans into a private military company. Prince also wanted a big piece of Ukraine’s military-industrial complex, including factories that make engines for fighter jets and helicopters. His full plan, dated June 2020 and obtained exclusively by TIME this spring, includes a “roadmap” for the creation of a “vertically integrated aviation defense consortium” that could bring $10 billion in revenues and investment.

The audacity of the proposal fit with Prince’s record as a businessman. For nearly a quarter century, the former Navy SEAL has been a pioneer in the private military industry, raising armies in the Middle East and Africa, training commandos at his base in North Carolina and deploying security forces around the world for the State Department and the CIA. Under the Trump Administration, Prince’s family—a powerful clan of right-wing Republican donors from Michigan—saw their influence rise. Prince’s sister, Betsy DeVos, was appointed Secretary of Education, while Prince himself leveraged contacts in the White House to chase major deals around the world.

The ones he pursued in Ukraine were among the most ambitious of his long career. But with Trump out of office, the Ukrainian government has slowed the process and invited more competition for the assets Prince coveted. “Had it been another four years of Trump, Erik would probably be closing the deal,” says Novikov, one of its lead Ukrainian negotiators.

Erik Prince walks to a closed-door House Intelligence Committee meeting on Capitol Hill in Washington, D.C., on Nov. 30, 2017.Aaron P. Bernstein—Bloomberg/Getty Images

This account of Prince’s ambitions in Ukraine is based on interviews with seven sources, including current and former U.S. and Ukrainian officials as well as people who worked directly with Prince to try to realize his aspirations in Ukraine. Those business plans, which have not been previously reported, were confirmed by four of the sources on both sides of the negotiations, all of whom recalled meeting in person with Prince last year to discuss them. The documents describe a series of ventures that would give Prince a pivotal role in Ukraine’s military industry and its ongoing conflict with Russia, which has taken more than 14,000 lives since it began seven years ago.

The documents detail several previously unreported ventures that Prince and his partners wanted the Ukrainian government to approve. One proposal would create a new private military company that would draw personnel from among the veterans of the ongoing war in eastern Ukraine. Another deal would build a new munitions factory in Ukraine, while a third would consolidate Ukraine’s leading aviation and aerospace firms into a consortium that could compete with “the likes of Boeing and Airbus.”

At least one of Prince’s offers to Ukraine appeared to be in line with U.S. geopolitical interests. As the Wall Street Journal first reported in Nov. 2019, Prince has been competing against a Chinese firm to buy a Ukrainian factory called Motor Sich, which produces advanced aircraft engines. China sought those engines to develop its air force. The U.S., concerned about the rapid growth of the Chinese military, has long urged Ukraine not to complete the sale. Prince emerged as the American alternative, offering to save the factory from China’s clutches.

But the Ukrainians had serious concerns about working with Prince, according to three people involved in the negotiations. Prince’s choice of allies in Kyiv—two men with ties to Russia—raised particular alarm. His Ukrainian business partner is Andriy Artemenko, who made headlines in 2017 by offering the Trump Administration a “peace plan” for the war in Ukraine that envisioned ways for the U.S. to lift sanctions against Russia. Another Prince ally in Kyiv was Andriy Derkach, a Ukrainian legislator whom the U.S. has accused of being an “active Russian agent.” Both Artemenko and Derkach worked to advance Prince’s business ventures in Ukraine last year.

“We had to wonder: Is this the best sort of partnership we can get from the Americans? This group of shady characters working for a close ally of Trump?” says Novikov, the former aide to Ukraine’s president. “It felt like the worst America had to offer.” Those concerns only heightened when, at a pivotal moment in negotiations, one of Prince’s associates proferred in writing a “participation offer” that Novikov considered an attempted bribe.

As the deals ran into resistance from the government in Ukraine, Prince’s allies faced bigger problems in New York City, where both Artemenko and Derkach are now under criminal investigation. The U.S. Attorney in the Eastern District of New York declined to comment on the investigation, which is reportedly focused on whether the two men were involved in a suspected Russian plot to sway the 2020 presidential election.

Prince does not appear to be a focus of that investigation. But Artemenko tells TIME that federal investigators have questioned him about his relationship with Prince. In interviews with TIME in April and May, both Derkach and Artemenko denied wrongdoing and described the investigation as part of a political witch hunt against Trump’s allies. Prince did not respond to numerous requests for comment, including a detailed list of questions about the documents outlining his proposals for Ukraine.

Andriy Artemenko speaks during an interview with Reuters in Kyiv, Ukraine, on Feb. 21, 2017.Valentyn Ogirenko—REUTERS

Among the guests at the Vodka Grill was Prince’s business partner, Artemenko, a tall, clean-shaven lobbyist in his early 50s. Artemenko says he has worked with Prince in the air-cargo industry for at least six years, transporting everything from weapons to vaccines around the world. Born and raised in Kyiv, he now resides mostly in the Washington area. In text messages obtained by TIME, he refers to Prince as “the boss.”

Their relationship began not long after Prince emerged from the Blackwater scandal of 2007. That fall, a group of Prince’s soldiers-for-hire shot up a crowded square in Baghdad, killing 17 civilians and wounding 20 others. Several of the gunmen were sentenced to decades in U.S. prisons for their roles in the massacre. (Trump pardoned four of them in his final weeks in office.) Prince’s testimony in Congress about the incident drove a national debate about the privatization of war, turning him, at the age of 38, into the defiant face of the modern-day mercenary.

In the wake of those killings, Blackwater lost a $1 billion contract to guard U.S. diplomats and officials in Iraq. But the company rebranded and continued to thrive. The Obama Administration granted major contracts to Prince’s firm to provide security in conflict zones. Prince’s interests expanded well beyond the military sector. He traded oil and minerals in Africa. He assembled a private army for his friend, the crown prince of Abu Dhabi. He prepared a force in Somalia to combat pirates in the Gulf of Aden. He helped train a hit squad for the CIA. When Trump took office, Prince called on the new Administration to privatize the war effort in Afghanistan, publicly pitching a plan that would let contractors handle many of the U.S. military’s functions.

Over the years, one of Prince’s most reliable lines of business has been wartime logistics: moving people and supplies into areas of conflict. Starting in 2006, the aviation arm of Blackwater air-dropped food and weapons for U.S. troops on the front lines in Afghanistan. “If you need to transport stuff in and out of a war zone, you’re not going to call UPS,” says a person familiar with Prince’s business operations. “His company does that.”

After working as a cargo broker in the 2000s, Artemenko had founded his own transport company in 2010, AirTrans LLC, which frequently flew cargo for Prince’s operation, he tells TIME. In 2015, Artemenko says, AirTrans officially became a part of Prince’s company, Frontier Resource Group.

Around that time, Artemenko says, the partners began discussing a venture in Ukraine’s weapons industry. Russia and Ukraine had been at war since Moscow annexed Crimea in 2014, leading the one-time allies to stop selling weapons to each other. The hardware Russia needed most were engines for its helicopters and fighter jets, many of which are still produced at Soviet-era plants in eastern Ukraine.

Apart from the potential to earn billions of dollars in profit, Artemenko says he saw these factories as a way to broker an end to the war in Ukraine. “The Russians need the full complex of aviation technology, starting with the engines,” he says. “This is a reason to force them to the negotiating table and make a peace deal. We can say: ‘OK, you need these spare parts, engines and everything else from Ukraine? Fine, but we want a deal for [eastern Ukraine], and then we want an agreement on Crimea.'”

The idea did not get much traction. Ukrainian officials recoiled at the notion of lifting their arms embargo against Russia in the middle of a war. Another one of Artemenko’s peace plans gained notoriety in 2017, when a draft of it reportedly landed on the desk of Michael Flynn, Trump’s first national security adviser. That plan, like the first, went nowhere.

Around the same time, Prince held a meeting on an island in the Seychelles with Kirill Dmitriev, a Russian official. The Washington Post reported their aim was to create a “back channel” from the Kremlin to the White House, an allegation both men denied. Special Counsel Robert Mueller’s report published in April 2019 devoted a few pages to the Seychelles meeting. According to the report, Prince told his Russian interlocutor that he was “looking forward to a new era of cooperation and conflict resolution.”

By the time Prince set his sights on the Ukrainian military industry, the nation’s conflict with Russia had settled into a kind of stalemate, with sporadic shelling and sniper fire along the front lines. Peace talks had stalled, and Ukraine’s government was increasingly desperate for a way out of the impasse.

The Trump Administration did little to help. Trump’s priority in Ukraine was not to make peace; it was to advance his own political fortunes. Amid his campaign for re-election, Trump asked Ukraine to investigate his opponent, Joe Biden, and held up military aid to Ukraine as a means of pressure. The campaign of coercion caused a breakdown in U.S.-Ukrainian relations.

Some advisers to President Volodymyr Zelensky saw Prince as a way to repair the damage. They wanted him to help arrange a meeting with someone in Trump’s inner circle, ideally Jared Kushner, the President’s son-in-law, says Novikov, who was Ukraine’s liaison to the Americans at the time.

Prince was unwilling to make that connection, says a person familiar with his thinking on the matter. “Erik made it very clear that he didn’t have the keys to Trump’s White House, and that he didn’t want to play that game.”

As an alternative, Prince’s team offered to line up an American lobbyist for Ukraine named Joseph Schmitz. A former Blackwater executive, Schmitz had been a foreign-policy adviser to the Trump campaign in 2016 and had contacts in the Administration. He was ready to represent Ukraine for a fee of $500,000 plus expenses, according to a proposed lobbying agreement obtained by TIME. (Schmitz did not respond to emails seeking comment.) Ukrainian officials received that agreement early last year from Artemenko’s lobbying firm but did not sign it.

Prince had sought some local assistance of his own. Among the people he met with in Kyiv was Derkach, the Ukrainian member of parliament whom the U.S. later accused of being a Russian agent.

Derkach, who confirmed to TIME that the meeting took place, was well positioned to help Prince understand the terrain. He had worked in Ukraine’s aviation sector after graduating from an elite university for spies in Moscow, the Dzerzhinsky Higher School of the KGB. In the early 2010s, when Derkach served as an adviser to Ukraine’s prime minister, one of his tasks had been to develop the aviation and machine-building sectors of the nation’s economy.

Ukrainian lawmaker Andriy Derkach at a news conference in Kyiv on Oct. 9, 2019.Gleb Garanich—Reuters

Derkach says he was intrigued by Prince’s vision for these industries. One major advantage Prince brought to the table was his list of contacts in the developing world. He had worked for many years in the Middle East and Africa, dealing with warlords and autocrats who could become new clients for Ukrainian weapons and aircraft. The main flaw in the plan, Derkach says, was the cooperation it required from Ukraine’s local factory bosses and oligarchs, who control much of the military-industrial complex.

“That’s not so much an issue with Erik,” he says. “It’s a problem of corruption in Ukraine, where you have the factory directors who do not want to sign documents and give up power.” Derkach recalled telling Prince: “‘You’ve worked everywhere. But Ukraine is special. It’s very hard to get any traction here. You have to gather a serious team of people who will move the process along.'”

Derkach says he did not join this team, and declines to say whether he was ever paid for the advice he gave Prince. But after their meeting in Kyiv, Derkach began urging Ukrainian authorities to support the deal Prince wanted. In March 2020, he invited Novikov, the presidential adviser, to a meeting to discuss the plans. “Derkach said, ‘We already have everyone on board, and still the deal is stalling,'” Novikov recalls. Derkach wanted to know who in the President’s administration was standing in Prince’s way. “That was the only thing he wanted to discuss with me,” Novikov says.

In the early summer of 2020, Ukraine moved to cement its partnership with Prince, whose intentions had become far more detailed and ambitious. In one message to Ukrainian officials, Artemenko provided Prince’s passport information along with a summary of their agenda for an upcoming trip. In a follow-up message, he noted Prince would be in Kyiv for several days during the week of June 15, 2020, and requested meetings with senior officials in the defense and intelligence agencies, adding cryptically: “There will be no official calls to government officials, as this visit is strictly private and apolitical.”

Arriving in Kyiv on a chartered flight from Minsk, Prince held a meeting that week with Zelensky’s chief of staff, Andriy Yermak, according to messages obtained by TIME between the people who arranged Prince’s travels. (Yermak confirmed to TIME that the meeting took place but declined to discuss it in detail.)

Things appeared to move quickly from there. The President’s office put Prince in touch with a law firm in Kyiv that frequently works for the Ukrainian government. The firm prepared a legal framework for completing the deal Prince wanted. The work was complex, especially when it came to acquiring Motor Sich, says the person familiar with Prince’s thinking.

The factory had been privatized in the 1990s, during Ukraine’s chaotic transition to capitalism. In 2016 and 2017, Chinese investors bought up shares in the factory from its private owners, paying an estimated $700 million for control of Motor Sich. They were not expected to give it up without a fight in the courts. So the lawyers had to find legal grounds for Ukraine to take control of the asset before re-selling it to a new investor. Their plan relied on a regulatory snag: Ukraine’s anti-trust agency had not granted approval to the Chinese investment. “It’s this weird situation where the Chinese bought the asset, never received approval for it, and it’s basically standing still,” says the person familiar with Prince’s thinking. That could allow the Ukrainian government to say: “‘We’re going to take control of the asset because it’s basically not being properly managed,’” the person says. “In a nutshell, that’s the argument.”

In the weeks after Prince’s visit, his associates prepared two versions of a detailed business plan and sent them to officials in Zelensky’s office. The first, dated June 23, 2020, stated that the acquisition of Motor Sich would require $50 million to purchase a minority stake, and another $950 million to buy 76% of the factory. The money was meant to come from Windward Capital, an investment vehicle that Prince has reportedly used in the past.

A helicopter assembly shop of JSC Motor Sich, Zaporizhzhia, southeastern Ukraine on May 18, 2021. Dmytro Smoliyenko— Getty Images

Another business plan for Ukraine’s military industry, dated June 29, 2020, provided new details and incentives for the government to participate. It described a planned takeover of Antonov, the state-owned airplane manufacturer, by replacing its CEO with an executive from Artemenko’s company. The proposal also called for an “ultimatum” to be issued to the Chinese investors in Motor Sich, who would be forced to either accept an “immediate sale” or face the “loss of value,” the plan stated. “If Chinese remain uncooperative,” the Ukrainian government should take over the factory and transfer control to new investors, the document says.

Another element of the business plan described a partnership between Ukraine’s main intelligence service and Lancaster 6, a private military company that has previously been involved with Prince’s deals in Africa and the Middle East. This partnership, which required approval from Ukraine’s parliament, would build a “state-of-the-art training center” and a “specialized services enterprise”—industry jargon for a private military operation—that would be involved in Ukraine’s “strategic planning, logistics, risk management, security forces training and consulting concerning security risks,” according to the plan. (The head of Lancaster 6, a longtime Prince associate named Christiaan Durrant, told TIME he was not aware of any such documents and asked for a copy; after being sent one, he stopped responding.)

Three of the projects described in the documents also include a “participation offer,” or a cut of the yearly profits. The participation offers listed in the document would be worth a total of around $35 million per year if the plan were to be executed. (The documents do not make clear who would get this money or why.) Novikov, who negotiated with Prince and studied the plan closely while serving as a presidential adviser, says he understood this as a proposal for kickbacks to government officials. “It looked like a bribe,” he says.

Paul Pelletier, a former U.S. federal prosecutor, agreed that the reference to “participation offers” looks suspicious. It would be likely to cause “alarm bells,” he says, at the Justice Department, where Pelletier served for years as a senior official overseeing foreign bribery cases. “On its face, the terms suggest some sort of kickback payments to government contracting officials—a definite no-no,” says Pelletier, who reviewed the document at TIME’s request. “No money or offers of money can flow to government officials, period.”

Artemenko insists that he and Prince never acted corruptly in their dealings, in Ukraine or elsewhere. “We never paid a bribe at the table,” he tells TIME. “We don’t want to do anything wrong. Only the transparent and legal way.” (Asked directly about the purpose of the participation offers, Artemenko’s lawyer, Anthony Capozzolo, declined to comment.)

Prince’s lawyer, Matthew Schwartz, did not respond to a detailed list of questions from TIME, including specific questions about the participation offers and the allegation that they referred to kickbacks.

As Trump’s chances in the presidential race began to look less certain in the fall of 2020, so did the prospects for Prince and his contacts in Ukraine.

In September, the U.S. imposed sanctions against Derkach, accusing him of being an “active Russian agent” involved in a plot to help Trump win a second term. About a month later, four FBI agents showed up at Artemenko’s home in the Washington area, Artemenko recalls. They wanted to know about his work in Ukraine, and his relationships with Prince, Trump lawyer Rudy Giuliani and others. “They asked me about my relationship with Erik, how we met, where we met,” Artemenko says. “Normal questions.”

Meanwhile, the dilemma with Motor Sich has only gotten more complex. The Chinese investors in the factory filed a $3.5 billion claim in December 2020 at an international court of arbitration, claiming that Ukraine’s decision to block the sale was illegal. The Ukrainian government responded by imposing sanctions against the Chinese investors, one of whom called the move “an abuse of state power and the suppression of normal business activity.”

Under the Biden Administration, the U.S. does not seem likely to throw its weight behind Prince’s projects in Ukraine. “The U.S. has not been very pro-Erik,” says the person familiar with his thinking. In a statement to TIME, a State Department spokesperson said the U.S. supports Ukraine’s efforts to block the sale of Motor Sich to the Chinese firm, but avoided taking a position on who should own the factory or saying anything about Prince.

Andriy Yermak, chief of staff to the President of Ukraine in Kyiv on Dec. 4, 2019. Paolo Verzone—VU for TIME

That leaves the status of Prince’s plans for Ukraine unclear. Yermak, the presidential chief of staff, says the government intends to nationalize Motor Sich and keep it under state control. Private investors, including Prince and his partners, would be welcome to bid on a stake in the factory through a competitive tender, Yermak told TIME in an interview in April. “We are interested in working with all our partners,” he says. “We are interested in there being fairness.”

At that time, Prince’s business partner said the two were still interested in bidding for the factory. “We are ready to show the money and explain the plan,” Artemenko says.

With reporting by Barbara Maddux and Madeline Roache

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