13.06.2025 Tenders

In a tender for billions: how Ukrzaliznytsia finances Russian oligarchs through the Kryukiv plant

Can the state-owned company responsible for rail transportation in Ukraine deliberately direct billions of hryvnias to companies linked to the aggressor country? Ukrzaliznytsia gave 5.37 billion hryvnias to Kryukiv Carriage Works (KVSZ), a company with Russian shareholders and a dubious reputation. Is this a corruption scheme that is operating under the nose of the authorities?

Details of the deal

From June 1 to June 7, 2025, 66,000 procurement notices totaling UAH 26.22 billion were published in the ProZorro system. The most high-profile was the deal of Ukrzaliznytsia for the supply of 95 compartment cars for UAH 5.37 billion. The order was awarded to Kryukiv Carriage Works, the only bidder that offered a symbolic discount of 0.003%.

The main part of the contract is 88 compartment cars of model 61-779, version 02 (10 compartments for four passengers and a compartment for the conductor’s rest) with a disc brake. The price of one such car was UAH 56.27 million, or $1.35 million at the current exchange rate. For comparison, at the end of 2023, such cars were ordered for UAH 44.08 million ($1.21 million). Thus, the price increased by 27% in hryvnias and 10% in dollars.

In addition, the order includes seven 61-779EGI railcars designed to carry passengers with disabilities. Their price is UAH 59.76 million ($1.44 million), which is 26% more expensive than the previous order in 2023, when they cost UAH 47.07 million ($1.29 million).

The prepayment under the contract is 58% of the total amount, or UAH 3.11 billion, and will be made after Ukrzaliznytsia’s application for the supply of railcars.

Overpriced: why are railcars getting more expensive?

The price of compartment cars in 2025 has become a record in recent years. In 2016, KVSZ supplied Ukrzaliznytsia with cars for $0.63 million per unit, and now the price has doubled to $1.35 million. Representatives of the plant explain the price increase by modernizing the cars, including installing disc brakes and equipment for passengers with disabilities. But does this justify the doubling of the cost?

For comparison, the Swiss company Stadler in Kazakhstan, with 400 employees, produces 100 railcars annually. KVSZ with 4,500 employees managed to deliver only 32 railcars in a year and a half. Such low productivity raises questions about the efficiency of the enterprise and its management.

Russian footprint: who is behind KVSZ?

According to YouControl, the main shareholders of KVSZ are Volodymyr Prykhodko (34%), Natalia Prykhodko (34%), and Stanislav Gamzalov (25%), a Russian citizen and chairman of the board of directors of the Russian Metal Construction Plant (Engels, Saratov region). In 2022, Gamzalov’s shares were arrested at the request of the Prosecutor General’s Office because of the purchase of parts from Russian companies at inflated prices by KVSZ, despite the availability of cheaper Ukrainian counterparts. The prosecutor’s office called it a scheme to withdraw funds to Russia with the assistance of a Russian shareholder.

The seized shares were transferred to the management of the ARMA, but in three years the agency has not identified their actual owner. This looks like a deliberate delay, as Ukrzaliznytsia’s cooperation with KVSZ continues unhindered. In January 2023, Ukrzaliznytsia’s Production Support Center branch even temporarily refused to allow KVSZ to participate in the tender because of its Russian shareholder, but at the end of the year the plant received permission and returned to cooperation.

Tender “for one”: violation of the law

The tender, announced in September 2023, aroused suspicions due to its “tailoring” to KVSZ. No other manufacturer was able to submit documents for participation, indicating an artificial restriction of competition. Moreover, the certificates of conformity for some railcars, in particular for passengers with reduced mobility, were outdated or missing. Despite these violations, the contract was signed without changes, which is contrary to antitrust and tender laws.

Additional violations include overpricing of repairs and components, lack of proper documentation, fictitious repairs, and the purchase of equipment at prices several times higher than market prices. These facts indicate a systematic violation of procurement procedures, which may point to corruption schemes.

The 2 billion scandal: who is behind the schemes?

By the way, in 2022, KVSZ was already involved in a criminal case regarding the withdrawal of UAH 200 million to Russia through fictitious contracts. At that time, Prime Minister Shmyhal and Foreign Minister Kuleba were accused of lobbying for the interests of KVSZ, despite its ties to Russian oligarchs. The situation hasn’t changed in 2025, as tenders continue to be awarded to companies with dubious reputations, and public funds go to companies linked to the aggressor country.

What do you know about other procurements?

In addition to the KVSZ scandal, Ukrzaliznytsia is at the center of another corruption investigation related to the activities of the Liski Transport Service Center branch. This branch purchased 252 fitting platforms worth UAH 608.58 million from TAS DNIPROVAGONMASH LLC, which is part of the TAS group associated with businessman Serhiy Tihipko.

Under the terms of the contract, Ukrzaliznytsia is to pay an advance of 50% of the total cost. Two bidders took part in the tender: TAS DNIPROVAGONMASH LLC and Karpaty Research and Mechanical Plant LLC. Tigipko’s company was chosen as the winner, despite numerous violations.

The scheme consisted of creating conditions that restricted competition, namely: an unrealistically short deadline for submitting proposals, specific requirements for suppliers that artificially narrowed the range of participants.

The anonymous firm and Kryukiv Carriage Works tried to challenge the tender requirements, but all requests were rejected. The anonymous company challenged the technical requirements for fitting platforms, in particular the use of tapered cassette bearings for the adapter (manufactured by Amsted Rail or SKF). According to them, the supply of such bearings with permits takes 7-11 months, which makes it impossible to fulfill the contract by June 30, 2025. However, these comments were ignored.

KVSZ also challenged the requirement to fulfill a similar contract for 2020-2024 for the supply of at least 126 platforms. The plant proposed to reduce this figure to 100 platforms, but the customer replied that in case of partial fulfillment of the contract, the participant must provide a positive feedback from the counterparty. This requirement looks like a way to weed out competitors.

By the way, TAS DNIPROVAGONMASH LLC, founded by a Cypriot company, has repeatedly won multimillion-dollar tenders. Therefore, the significant advance payments provided for in the contract create risks of withdrawal of funds that may end up in the pockets of officials.

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