The Central Asian state's KNB service, the successor agency to the Soviet-era KGB, said it was investigating a number of unnamed Defense Ministry officials on suspicion of purchasing faulty artillery and other defense systems from Israeli firms.
"These systems had not been completed properly, they are still in the phase of research and development," KNB spokesman Kenzhebulat Beknazarov told a briefing.
"The KNB is investigating actions by a number of Defense Ministry officials during the signing of contracts with Israeli companies," he said. The government had incurred losses of $82 million as a result, he added.
Israeli defense officials were not available for comment.
The powerful KNB service has traditionally strained ties with other parts of the security apparatus but public outbursts of disagreement are rare and sometimes herald high-profile shifts of policy in the tightly run former Soviet republic.
Close contacts with Israel
The case could potentially sour relations between Kazakhstan, an oil-rich mainly Muslim country on the Caspian Sea, and Israel. The two have had good ties so far including close contacts in the defense and intelligence sectors.
Beknazarov said Israeli businessman Boris Sheinkman, arrested in Kazakhstan at the end of March, acted on behalf of Israeli companies and was being questioned in connection with this case. Sheinkman was not available for comment.
Beknazarov added that Kazhimurat Mayermanov, a Kazakh deputy defense minister, was arrested on April 10 but denied Kazakh media speculation that he was involved in the case.
Kazakhstan's Defense Ministry separately issued a statement saying it had been in touch with KNB during its contacts with Israeli partners. It said it had earlier uncovered shortcomings in some hardware and agreed the Israeli side would fix them.
It quoted Israeli officials as saying they would "guarantee that all modernized hardware would be altered according to international standards."
The statement said nothing about the KNB investigation.