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Pentagon accounting error overvalued Ukraine weapons aid by $3 billion -sources

Pentagon building in Arlington

By Mike Stone

WASHINGTON (Reuters) - The Pentagon overestimated the value of the ammunition, missiles and other equipment it sent to Ukraine by around $3 billion, a Senate aide and a defense official said on Thursday, an error that may lead the way for more weapons being sent to Kyiv for its defense against Russian forces.

The error was the result of assigning a higher than warranted value on weaponry that was taken from U.S. stocks and then shipped to Ukraine, two senior defense officials said on Thursday.

"We've discovered inconsistencies in how we value the equipment that we've given" to Ukraine one of the senior defense officials told Reuters. The officials and the Senate aide spoke on the condition of anonymity. Congress is being notified of the accounting adjustment on Thursday, the sources said.

The defense official said it is possible the amount of overvalued weaponry could grow beyond $3 billion as the Pentagon examines the situation more thoroughly.

In its accounting, the Pentagon used replacement cost to value the weapons aid, instead of the weaponry's value when it was purchased and depreciated, the senior defense officials said.

Since August 2021, the United States has sent weapons valued at about $21.1 billion to Ukraine from its stockpiles.

Changing the valuation of the equipment could delay the Biden administrations' need to ask Congress to authorize more funds for Ukraine as the debt ceiling fight intensifies.

"The Department of Defense's change in evaluating the costs of arms sent to Ukraine is a major mistake," U.S. Senator Roger Wicker, the top Republican on the Senate Armed Services Committee, said. "Its effect would be to underestimate future needs for our European allies. Our priority should be a Ukrainian victory over Putin. Unilaterally altering military aid calculations is an attempt at deception and undermines this goal."

The U.S. has sent a wide variety of equipment to Ukraine in 37 Presidential Drawdown Authority packages including High Mobility Artillery Rocket System (HIMARS) launchers, Javelin anti-tank weapons and a Patriot surface-to-air missile system.

"The services - the Army, Navy, Air Force, Marines - were using, the current replacement cost of the item," one of the senior defense officials said.

A March 31 memo, seen by Reuters, clarified to the top accountants in each branch of service which method should be used, citing existing regulation.

It will take time to work through the accounting for billions of dollars worth of equipment sent to Ukraine, the senior defense officials said.

In the case of 155 millimeter ammunition for Howitzer cannons, of which more than 1.5 million have been sent to Ukraine, each cost about $800 today. But the actual cost of each shell, which have been delivered to the U.S. military each year for several decades, can be averaged out for a much lower price, one of the senior defense officials said.

(Reporting by Mike Stone in Washington; Editing by Chris Sanders, Anna Driver and Grant McCool)