JULY 2025
Newsletter 29:
The Law on Anti-Corruption Agencies, Government Reshuffle, Glide Bombs, and Countering Shahed Drones
NEWS OF THE WEEK
On Monday, June 21, the Security Service of Ukraine, the State Bureau of Investigations (SBI), and the Office of the Prosecutor General conducted nearly 70 high-profile searches of the National Anti-corruption Bureau (NABU) detectives and of the employees of the Special Anti-corruption Prosecutor’s Office (SAPO, overseeing NABU). SBI claimed to have exposed a Russian spy network.
On Tuesday, June 22, the Parliament of Ukraine passed the law 12141, ending the independence of NABU and SAPO. The law subordinated the two anti-corruption bodies to the Prosecutor General of Ukraine, controlled by the Presidential Administration. In effect, the law cancelled the independence of NABU and SAPO, curbing their power to probe any official, including from the presidential circle. It was signed by the president 15 minutes after the parliamentary vote.
Why this is important
Domestic consequences: people on streets
The law 12141 triggered street demonstrations, calling for the removal of Andrii Yermak, the closest advisor to President Zelensky, who has been criticized for consolidating control over key institutions and people in government.
International consequences: shooting itself in the foot
- Ukraine nearly buried its prospects of EU accession, just as the EU was discussing how to progress on Ukraine’s accession around Victor Orbán’s opposition.
- Kyiv created preconditions for Europeans to refuse weapons deliveries and financial aid to Ukraine under the pretext of unchained corruption. In the hours following the signing of the law, the European Commission and the OECD warned of possible withholding of financial and military aid.
What happened next
The Rada voted the law 12141 on the last day of work before the summer recess, but Ukrainian parliamentarians had to postpone their vacation plans to undo the damage they had done. Already on Thursday, the President submitted a new bill to the Parliament, which would restore the independence of the anti-corruption bodies.
Source: Ukrainska Pravda
INTERNAL POLITICS
Unpacking Ukraine’s recent government shake-up
On July 17, President Zelensky announced a replacement of the Prime Minister of Ukraine, triggering the government reshuffling, only one year after the latest one had taken place: with the same people changing chairs.
We give 3 reasons for the shake-up and single out the institutional and personal winners and losers.
1. Internal reason: public trust metrics
A key internal driver is a shift in public sentiment toward President Zelensky. The Kyiv International Institute of Sociology’s June 2025 poll showed a 9% drop in the public trust toward the President, from 74% in May to 65% one month later. Ukrainian government closely monitors the polls, which likely played a role in the timing of the government reshuffle.
Figure 1. Public trust in President Zelensky
Source: The Kyiv International Institute of Sociology (KMIS), June 2025
2. The weight of the deficit: a financial imperative
The financial landscape presents an equally compelling reason for the government’s restructuring. Ukraine is currently grappling with a staggering €35 billion budget deficit, with a significant €8 billion shortfall specifically within the defense sector. The deficit impacts domestic weapons procurement and social welfare payments, threatening both national security and social well-being. The fiscal crisis may have pushed the decision to reorganize the government, targeting defense spending and industrial output.
3. The weight of the U.S.: a Yermak imperative
A third reason for the change (said to have been long in the making), was the U.S. pressure to lower the influence over Ukraine’s government by Zelenksy’s chief of staff Andrii Yermak. However, the change has strengthened, if anything, the people associated with him, giving rise to theories that even if Yermak is pushed out, he will keep hold over the government through his trusted lieutenants.
The winners and losers of the government reshuffle
Same as last summer, the 2025 government reshuffle, voted by the Rada on July 17, was just that: shifting new chairs under the old people. The process is important to watch however, to understand the shifting gears of influence behind the government. Hence our analysis of the winners and losers of Ukrainian elites.
Main winners:
1. The biggest winner of the government reshuffle is former Minister of Economy Yulia Svyrydenko, who became Ukraine’s new Prime Minister, replacing Denys Shmygal. In addition to the promotion (from a minister to the second person in government, after the President), Svyrydenko is starting off at her new job from a stronger position compared to her predecessor. Unlike Shmygal, Svyrydenko was able right from her first day in office to appoint “her people” in two key positions in the renewed government (who we see as the second and third winners of the government reshuffle):
2.Oleksii Sobolev, former First Deputy Minister of Economy, succeeded his boss at the helm of the Ministry.
3. Taras Kachka, another Svyrydenko’s deputy, and former Ukraine’s Trade Representative, became Deputy PM for European Integration, replacing Olha Stefanishina.
Svyrydenko’s win does not stop at human resources. While moving up, she left her former Ministry strengthened: as part of the institutional transformation, the Ministry of Economy (MinEcon) absorbed the former Ministry of Ecology, in charge of licenses for natural resources development, and the former Ministry of Agriculture, which develops agricultural policy, regulates food production, and regulates land use, and thus presides over an under-explored potential of the land privatisation reform, passed back in 2020. This transformation will expand the responsibilities of the Ministry of Economy, making the Minister a stronger figure, in charge of the few remaining revenue-producing economic activities in the country.
4. A fourth winner of the government reshuffle is Mykhailo Fedorov, who moved up from the Deputy PM for Innovation, Education, Science and Technology Development to First Deputy PM, while retaining control over the Ministry of Digital Transformation he has led since 2019. It is the transition from Deputy to First Deputy PM which matters, making Fedorov the second most-important figure in the government, after Svyrydenko. The promotion is even more telling since Fedorov is one of the few people remaining in the government who is not connected to Andrii Yermak, Zelensky’s most influential adviser.
Main losers:
- It is arguable if former PM of Ukraine Denys Shmygal lost influence. His appointment to the Minister of Defense after a PM position is technically a demotion. At the same time, MoD controls an important military budget. We argue that Shmygal’s new position is precarious, as he has to share his responsibilities with his predecessor Rustem Umerov, who had been criticized for under-performance. Furthermore, as Minister of Defense Shmygal should be well-positioned to lead the negotiations on the U.S.-Ukraine cooperation in drones production. Yet, it is the new PM Yulia Svyrydenko who is heading these talks, creating more questions about the exact role of Shmygal.
- Rustem Umerov was removed from the Minister of Defense role and appointed to head the National Security Council (NSC) of Ukraine, coordinating the work of law enforcement agencies and the military. This can be seen as a demotion, given the difference in budget and international visibility of the two government bodies. However, Umerov will keep some of his old responsibilities in the new chair (despite a defense budget deficit and too few, too slow state contracts for Ukrainian and foreign weapons manufacturers, resulting in the ammunition hunger on the front lines). His role in international defense partnership negotiations (unusual for the head of the NSC) brings further confusion into the role of Shmygal (both Umerov and Shmyhal represented Ukraine at the Ramstein meeting on July 21). Given Umerov’s strong preference for international over domestic meetings, it remains an open question how the day-to-day coordination of the NSC will be ensured, given its new chief’s conflicting priorities.
- A third person to lose influence as a result of the government shake-up is former Minister of Strategic Industries (or MinStratProm in Ukraine) Herman Smetanin. He lost ministerial position and the ministry, as MinStratProm was merged with (and disappeared into) the Ministry of Defense. Under Smetanin, MinStratProm’s most urgent goal was scaling domestic defense industry production. But despite growth in some areas (drones, EW, CUAS), those which specifically were under the Ministry of Strategic Industry’s responsibility (rockets, shells, and other heavy industry equipment) have not reached the desirable ramp-up. Granted, Smetanin spent under one year in this role, and the task was colossal for any person to achieve. He has now returned where he came from: to UkrOboronProm, renamed Ukraine Defense Industries, the state heavy industry conglomerate, as an interim CEO, until a permanent one is found. Smetanin’s future is all but clear.
- Olha Stefanishyna was removed from the positions she held simultaneously: of Deputy PM for Euro-Atlantic Integration and of the Minister of Justice, to what should be a temporary position of a Special Representative of Ukraine to the U.S.. This is meant to be a waiting room to eventually replace the current Ukraine’s Ambassador to the U.S. Oksana Markarova. However, Stefanishyna’s removal from the ministerial position is a demotion, the future of which is also overshadowed by a conflict of interest investigation conducted by Ukraine’s anti-corruption agency NABU.
Source: Eastern Cirlces
DEFTECH DEVELOPMENTS
Counter-Drone Systems:
Ukraine is ramping up production of low-cost interceptor drones to counter the rising number of Shahed/Geran’ kamikaze drones launched by Russia. In June alone, over 5,000 Shaheds were used in attacks on Ukraine, with some nights seeing more than 700 launched simultaneously.
Air defense effectiveness is declining: only 50% of Shaheds were shot down, 36% were intercepted by electronic warfare, but 14% reached their targets. Traditional air defense systems like the Patriot, which cost several million dollars per missile, are too few and expensive to deal with this scale of attacks. Ukraine’s new approach focuses on building thousands of small, cheap drones capable of intercepting and destroying the incoming threats.
These interceptors vary in shape and design, such as Sting or American made Swift Beat, but all are guided either by radar or visual systems. They are cheaper to produce, priced between $1,000 and $5,000 per unit, and can reach altitudes of around 3,000 km. The Defense Procurement Agency (DPA) of Ukraine has already signed contracts for tens of thousands of them. Production is set to continue as long as industry capacity and defense budgets allow (which is a problem).
Ukrainian officials and analysts say this shift is critical. Russian drone tactics have evolved, with attacks now coming in faster and from higher altitudes. The interceptors are meant to offer scalable response that does not deplete high-end missile stocks.
President Zelenskyy pointed to the system’s success, noting hundreds of Shaheds downed in a single week. Even Russian officials who engaged in Russia’s military effort like Alexey Rogozin have admitted publicly that Ukraine’s expanding drone defense is causing real problems for Russia’s strategy. The approach is already helping shield Kyiv and may be extended to other parts of the country.
According to Forbes, Ukraine’s drone-based air defense is not just a battlefield adaptation—it’s also a political signal. By relying on domestic production and reducing dependence on foreign missile systems, Ukraine is trying to demonstrate resilience and innovation under pressure. If it works, this model could reshape the approaches to counter-drone warfare.
Ukrainian KAB:
In the context of the Russian invasion, a guided aerial bomb — also known as a corrected aviation bomb, or KAB — is either a munition designed from the outset for precision strikes or a standard Soviet high-explosive bomb modified with an add-on kit. These kits typically include aerodynamic surfaces, a GPS-based guidance system, and a control unit, allowing for improved accuracy and extended range. Once fitted on to a gliding bomb, it turns the latter into a weapon capable of gliding tens of kilometers after being dropped from an aircraft. The main advantages of a KAB are low cost and the ability to strike targets without entering enemy air defense range.
Russia has made KABs a core element of its battlefield strategy. They’re launched from up to 12 km altitude and 80 km away. AND Russia continues to upgrade its strike capabilities. On 24 July 2025, it targeted central Kharkiv with a guided aerial bomb launched from a distance of 100 kilometers. During the full-scale invasion, Russia deployed 51,000 guided aerial bombs, or KABs. In 2024 alone, it used over 40,000 of them. According to RUSI, by the end of 2025, Russia aims to produce more than 750,000 of these munitions. Each unit costs about $20,000, much cheaper than a cruise missile, while KABs far more effective than unguided bombs.
Ukraine’s response follows two tracks.
First: adapting Western munitions, such as JDAM, GBU-39, and the French HAMMER for use on Soviet-era jets like the MiG-29, Su-27, and Su-25. These bombs are more precise, but they require higher altitudes to reach full range and are vulnerable to Russian GPS jamming. Supply volumes are also limited to a few hundred units per year, while Ukrainian forces need hundreds daily.
So Ukraine turned to the home industry. At least eight Ukrainian companies are working on modular guidance kits to turn Soviet FAB-500 bombs (of which there are many in Ukrainian warehouses) into Ukrainian-made KABs. Some prototypes have already been tested on Su-24 aircraft, with promising early results. But as of July 2025, none has entered serial production.
Several problems stand in the way. Most critically, state funding mechanisms are only being developed. A single unit costs roughly $25,000, and government contracts will be the only way to scaling after the current testing phase is complete. Some components, especially navigation modules, are imported, adding cost and delay, but domestic navigation modules for the KABs are being developed. Finally, even successful prototypes must undergo slow and complex certification with the Ministry of Defense. Meanwhile, production capacity remains limited. Considering the Ukrainian Armed Forces demands, industrial infrastructure and budget are needed to meet it.
Ukraine has the technical talent and the initial design — but needs funding, coordination, and the industrial base to scale.
Prepared by Anastasiya Shapochkina, Daryna Patiuk and Bohdan Kostiuk.
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