Case File

Serbia’s Price Inflation Scandal

Author
Carla Martínez
Published on
January 20, 2026
Image
This photo published on 8 August 2019 by Islamic State media in Yemen shows Serbian mortar shells 81 mm M72 HE KV Lot 01/18 in Zaaj Area of Qevh, Bayda, Yemen. The mark on the shells means lot 01, manufactured in 2018 by Krusik, Serbia.
mortars on the ground
This photo published on 8 August 2019 by Islamic State media in Yemen shows Serbian mortar shells 81 mm M72 HE KV Lot 01/18 in Zaaj Area of Qevh, Bayda, Yemen. The mark on the shells means lot 01, manufactured in 2018 by Krusik, Serbia.

Contents

Contents

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Introduction

Introduction

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In 2013, confidential documents from Serbia’s Ministry of Defence warned that arms exports to Saudi Arabia carried a serious risk of diversion to rebel groups. Those warnings appeared prescient: by 2019, images emerged showing Serbian mortar shells in the hands of Islamic State fighters in Yemen. The munitions were traced back to a contract between the manufacturer, Krušik, a Serbian state-owned arms manufacturer, and GIM, a private arms company under contract 28/13 signed 5 March 2018.

The purchase of these weapons by Saudi Arabia was mired in allegations of serious conflicts of interest and price inflation. The deal for the mines and hand grenades totalled $43 million accounting for 75 percent of Serbia’s total arms exports to Saudi Arabia in 2017.

Between 2016 and 2018, GIM, intermediated by the father of Serbia’s then Interior Minister, signed four contracts with Serbian arms company Krušik purchasing 487,000 mines and 210,000 hand grenades at advantageous prices. The deal was not only unprofitable for Krušik, but also allowed GIM to earn at least $15.9 million in illegal profit as stated by the State Audit Report in 2018.

GIM was the exporter and there were two importers: Rinad Al Jazira registered in Saudi Arabia and Larkmont Holdings LTD, an offshore company registered in the British Virgin Islands, whose Ultimate Beneficial Owner is listed as a representative of Rinad Al Jazira.

The State Audit Institution of Serbia determined that GIM illegally earned profits totalling $5.59 million in 2017 and $10.31 million in 2018 owing to inflated prices in the sale of weapons. The company had purchased weapons at advantageous prices from the state-owned arms factory Krušik and then sold them at higher prices to Saudi Arabia. This drew suspicion as the deal was brokered by the father of Serbia’s then Interior Minister, who is also responsible for the licensing of companies for arms trading. While the minister, Nebojša Stefanović, denied the allegations, the financial improvement of GIM coincided with the engagement of his father, Branko Stefanović.

Case Details

Case details

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Seller country
Serbia
Seller company
Krušik, GIM (Global Ispitivanja)
Buyer country
Saudi Arabia
Goods category
Small Arms & Light Weapons, Mines (anti-personnel)
Equipment sold
487,000 mines; 210,000 hand grenades;
Deal value
$43 million
Sum involved in corruption
At least USD 15.9 million (illegal profits from inflated prices in the sale of weapons).
Start year
2016
End year
2018
Outcome status
Mixed

Actors

Actors

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  • Krušik - State-owned Serbian arms company; initially founded in 1939 as a private ammunition company, Vistad; nationalised and renamed in 1948 to Krušik.

  • GIM (Global Ispitivanja) - Private Serbian intermediary company; founded in 1990; intermediary between Krušik and Saudi Arabia; represented by the father of Serbian Minister of Interior affairs and Deputy Prime Minister; headquartered in Belgrade, Serbia.

  • Branko Stefanović - Father of then Serbian Minister of Interior affairs and Deputy Prime Minister, Nebojša Stefanović; intermediary between Krušik, GIM and Saudi Arabia from 2016 to 2018; listed as representative and legal adviser of GIM; had joint businesses (United BG and Worldwide Construction and Engineering) at least until 2018, with Goran Todorovic, Director of GIM;. Died in 2020.

  • Goran Todorovic - Director and owner of GIM; connected to Branko Stefanović through joint businesses (United BG and Worldwide Construction and Engineering).

  • Nebojša Stefanović - Minister of Defence of Serbia (2020-2022) and member of the Serbian Progressive Party; former President of the National Assembly of Serbia (2012-2014), Minister of Internal Affairs (2014-2020), and Deputy Prime Minister (2016-2022); ties to Serbian criminal networks.

  • Silk Way Airlines - Private Azerbaijani cargo airline company; founded in 2001; granted diplomatic special flight status by Serbia for the transportation of weaponry from Serbia to Saudi Arabia; headquartered in Baku, Azerbaijan.

  • Rinad Al Jazira - Saudi importer; bought Krušik weapons from GIM; registered in Riyadh, Saudi Arabia.

  • Larkmont Holdings LTD - Offshore company; founded in 2016; bought Krušik weapons from GIM; the Ultimate Beneficial Owner is registered in the same address as the company Rinad Al Jazira; registered in Tortola, British Virgin Islands.

  • Alhassan Muhammad Abdulkareem - Ultimate Beneficial Owner of Larkmont Holdings LTD, listed as one of the three representatives of Rinad Al Jazira who came to inspect the weapons in Krušik factory in May 2017 alongside the GIM delegation formed by Branko Stefanović, the director of GIM and Mirko Manojlovic. Subjected to a Saudi royal decree on suspicion of corruption in 2020.

  • Aleksandar Obradović - Whistleblower and former IT worker at Krušik; exposed contracts between Krušik and GIM in 2019 linking the father of the Interior Minister as intermediary of deals with Saudi Arabia. The worker union at Krušik, had averted authorities in 2015 of possible wrong doing by the state owned company.

Timeline

Timeline

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2016
  • 26 JanAmongst information leaked to Arms Watch, an internal document shows Krušik response to an offer from GIM for the purchase of high-explosive mortars.
  • 1 DecSaudi Arabia sent a letter to the Republic of Serbia declaring weapons purchased by Rinad Al Jazira from GIM were for the exclusive use of the Saudi Ministry of Defence and would not be re-exported; however, identical 81 mm HE mortar shells from Lot 01/18 under contract 28/13 between Krušik and GIM, appeared in Islamic State footage in Yemen in 2019.
  • 16 DecThe first of four contracts related to the purchase of 487,000 mines of various calibres and models and 210,000 hand grenades was signed between GIM and Krušik. In the contracts, GIM received favourable prices compared to the competition.
2017
  • 27 AprGIM writes a letter to Krušik requesting access for three GIM representatives and three Rinad Al Jazira employees to the Krušik factory in Valjevo for weapons inspection.
  • 8 MayThree Rinad Al Jazira employees alongside three GIM representatives inspect weapons at the Krušik factory in Valjevo.
2018
  • 25 SepLeaked information to Arms Watch show emails between Krušik and GIM detailing how some of the weapons for the Saudi Defence Ministry were going to be purchased by Larkmont Holdings LTD, an offshore company registered in the British Virgin Islands. According to the Pandora Papers, the entity’s Ultimate Beneficial Owner is Muhammad Abdulkareem M Alhassan, registered in Saudi Arabia, sharing address with Rinad Al Jazira. He was subjected to a royal decree by the Saudi crown on suspicion of corruption in 2020.
  • 5 MarThe second of four contracts is signed between GIM and Krušik.
  • 17 MayClearance is granted to a GIM delegation to travel to Saudi Arabia in June 2018 for other weapons deals. This time, Branko Stefanovic is listed as the legal advisor of GIM.
  • 18 MayThe third of four contracts is signed between GIM and Krušik.
  • 26 JunThe last of four contracts related to the purchase of 487,000 mines of various calibres and models and 210,000 hand grenades is signed between GIM and Krušik.
2019
  • 10 MarGIM re-exports Krušik weapons from the port of Burgas, Bulgaria, to Jeddah, Saudi Arabia, aboard the Gibraltarian-flagged vessel Bow Diamond.
  • 21 MayThe shipment arrived at the port of Burgas.
  • 28 JunThe Swiss cargo vessel Thorco Basilisk departs from the port of Burgas, Bulgaria, bound for Jeddah, Saudi Arabia, carrying 21 containers with 43,000 pieces of Serbian mortar shells.
  • 6 JulThe shipment arrived at the Jeddah Islamic Port.
  • 8 AugA photo of Serbian mortar shells 81 mm M72 HE KV Lot 01/18 manufactured by Krušik and exported by GIM, is published by the Islamic State in Yemen.

Outcomes

Investigation Outcomes

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2019
  • 15 SepArms Watch published information facilitated by Aleksandar Obradović, an IT worker at Krušik, including contracts between Krušik, GIM, and Saudi Arabia that revealed the Prime Minister’s father as an intermediary and showed that GIM, directed by his associate and business partner Goran Todorović, received more favorable terms than competition.
  • 18 SepJust three days after the Arms Watch report, following leaked documents to the press from whistleblower Obradović, he is arrested by the Serbian Security Intelligence Agency (BIA) at his workplace at the Valjevo plant.
  • 20 SepThe District Court in Belgrade judge Miloš Labudović, in charge of the preliminary procedure for Krušik whistleblower, ordered house arrest. Aleksandar Momčilović, the deputy prosecutor for high-tech crime, filed a complaint against it.
  • 14 OctUnder media and public pressure, Obradović was transferred from the jail to his home in Valjevo.
  • 18 NovSerbia’s Prosecutors’ Office for Organised Crime demanded the Military Counter-Intelligence Agency (VBA) and the BIA to launch a probe into Krušik. The Prosecutor's Office for Organised Crime did not seek information from the Interior Ministry as part of its investigation.
  • 9 DecThe BIA announced that there was no evidence of Branko Stefanovic’s involvement in GIM, no sign of any conflict of interest.
  • 18 DecObradović is released from house arrest after protests and a petition for his release is signed by 25,000 citizens. Overall, Obradović spent three weeks in prison and two months under house arrest.
  • 30 DecThe Serbian State Audit Institution (DRI) publishes its audit report on Krušik for the year 2018. The report said that Krušik may not have received all the benefits from the weapons sale because the deal was carried out on terms that were more favourable to GIM than originally agreed.
2020
  • 6 JulBranko Stefanović passed away from COVID-19.
  • 23 SepThe Serbian Prosecutor’s Office for Organised Crime issued an Order of Secrecy, which declares 80% of the evidence gathered by whistleblower Aleksandar Obradović as secret.
  • 14 OctThe High-Tech Crime Prosecutor’s Office questioned Stevan Nikčević, serving at that time as State Secretary of the Ministry of Tourism, Trade and Telecommunications. Questioned as one of the two witnesses in the case against whistleblower Aleksandar Obradović’s.
2021
  • 29 MayNebojsa Stefanovic resigned as head of the ruling Serbian Progressive Party (SNS) Belgrade branch over the recent scandal involving the illegal wiretapping of President Aleksandar Vučić. Although he kept his ministerial positions until the termination of the mandate.
  • 3 JunThe Serbian Prosecutor’s Office for Organised Crime asks the Interior Ministry’s Service for the Fight against Organised Crime to probe allegations that a company connected to Defence Minister Nebojsa Stefanovic’s father bought weapons at preferential prices from the state arms manufacturer Krušik.
  • 30 JunThe High-Tech Crime Prosecutor’s Office questioned Jovanka Andrić, then acting General Director of Krušik, as one of the two witnesses, for the investigation against whistleblower Aleksandar Obradović.
2022
  • 6 JulEU Parliament passes resolutions urging Serbia to resolve the Krušik case. No formal response was given.
  • All the proceedings have been pretrial preliminary investigations without any conclusive result nor legal.

References

References

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