Ukraine Aspires to Become Arsenal to the West

Executive Summary:

• Since the beginning of Russia’s war in 2022, Ukraine has been rapidly transitioning from importing arms to producing them domestically and is working toward becoming a significant player in the global arms market.
• Ukraine is expanding its production capacity for critical technologies such as drones, missiles, and robotic warfare systems, with aspirations to leverage its defense industry as a strategic advantage in both military and economic terms.
• The defense sector has become a testing ground for Western military technologies, with partnerships involving the United States, European Union, and private defense firms in innovation and arms production on Ukrainian soil.

Prime Minister Denys Shmyhal announced on November 5 that the Ukrainian government has begun a preferential low-interest loan program for arms and military equipment manufacturers to prioritize the establishment of a strong domestic defense industry (Kmu.gov.ua, November 5). Ukraine is gradually transitioning from being an importer to a domestic producer of arms and military technology. Ukraine has increased its artillery and mortar shell production by 25 times this year. Ukraine is also projected to increase its annual drone production to four million next year (see EDM, October 8). Overall, this year, Ukraine produced military vehicles, air, sea, and ground drones, ammunition, electronic warfare, communications equipment, and ground robotic platforms (Ekonomichna Pravda, September 19). Ukrainian sources estimate that the country’s military-industrial complex could be capable of producing $20 billion worth of weapons and equipment annually, but its state budget has only been able to find $6 billion worth of funding (Kyiv Independent, April 18). Ukrainian Minister of Strategic Industries Oleksandr Kamyshin stated, “From the viewpoint of scale and cost, we are efficient and capable of producing enough, the only thing missing is funding” (RBC-Ukraine, May 9). Russia’s full-scale invasion of Ukraine has transformed its military from a hodgepodge of aging Soviet gear to one of the most innovative and combat-hardened forces in the world.

A strong military-industrial complex is not new for Ukraine. It was a critical manufacturing hub for the Soviet military-industrial complex and some of its most advanced military projects were designed and assembled in cities such as Kharkiv. During Soviet times, a fifth of the Soviet military-industrial complex was situated in Ukraine, where it employed nearly three million people across hundreds of state companies and research bureaus. In comparison, Ukraine’s military-industrial complex currently employs around 300,000 people across 400 private and 100 state-controlled defense companies.

Western governments and companies view Ukraine as a testing site for military technologies that rarely see action on the battlefield today, particularly those designed toward large-scale conventional warfare such as tanks and ballistic missiles. Under this exchange, the West provides Ukraine with equipment, capital, and knowledge while Ukraine delivers real-time feedback and innovation developed from combat experience. The Kyiv Independent has highlighted how the frontlines have become a true “hotbed of military innovation” and a “setting for constant ongoing experimentation and combat testing” (Kyiv Independent, October 10).

Andre Pienaar, chief executive of C5, an investment firm and strategic partner of the Ukrainian Brave1 Platform, noted the “unprecedented” value of Ukraine in bringing Western military technologies closer to real war conditions (The Kyiv Independent, October 9). The Brave1 Platform, a government initiative launched in April 2023 to attract and coordinate foreign investment in Ukraine’s defense industry, is expected to help generate around half a billion dollars toward the country’s military-industrial complex (The Kyiv Independent, October 9). Brave1 has since registered around 3,000 companies interested in or undertaking joint ventures with Ukraine. Foreign direct investment into Ukrainian defense startups has also seen an increase in 2024  from $5–25 million and has the potential to reach $50 million in investments by the end of the year (Ukrainska Pravda, October 31).

The United States has taken initiative to help develop Ukraine’s defense industry. In December 2023, Biden administration held the Ukrainian Defense Industrial Base conference, which 350 US and Ukrainian defense companies attended (Kmu.gov.ua, December 7, 2023). Six months later, the United States established a Ukrainian Defense Enterprise Program which has invested $2 billion into Ukrainian defense companies (Defensenews.com, May 16). In June 2024, the United States and Ukraine signed a bilateral security agreement, which included “defense industrial cooperation, including the co-development, coproduction and supply of Ukraine’s defense industrial base requirement” (President.gov.ua, June 13).

The European Union has undertaken similar ventures through its Office for Defense Innovation in Kyiv. The office is tasked with integrating Ukraine into European defense programs and providing channels for bilateral consulting between European defense companies and the Ukrainian military (The Kyiv Independent, February 24). Funding domestic production in Ukraine has even become a preferred alternative for some EU member states struggling to offset their own arsenal toward Ukraine.

Deputy Ukrainian Defense Minister Dmytro Klimenkov has noted that cooperation is of obvious benefit to Ukraine, as it “will allow us to receive modern arms directly from producers” leading to “faster and more efficient modernization of Ukraine’s armed forces” (The Kyiv Independent, June 10). In turn, for Europe, these partnerships will bolster EU defense companies and increase their autonomy from the United States.

US and EU Defense Cooperation With Ukraine

The benefits of cooperation with Ukraine cannot be underestimated. Ukraine is currently at the forefront of developing and implementing robot warfare systems, having engaged more than 200 different ground-based military robotic systems (Mil.in.ua, January 17). Ukraine is also leading innovation into low-cost, high-energy laser anti-drone weapons, technology, which is of interest to US aerospace and defense conglomerate RTX, EU missile manufacturer MBDA, and UK security and defense company QinetiQ. After the successful second International Forum of Defense Industry, Pienaar said, “Ukraine has been a base of great technical professionals and tech know-how for a very long time” (MFA.gov.ua, October 2; The Kyiv Independent, October 9).

Of special interest to Europeans is Ukrainian long-range missile production. Romania is currently cooperating with Ukraine on the development of the P-360 Neptune anti-ship missile with a range of 400 miles (Ukrinform, August 3). In April 2022, a Neptune missile sunk the Moskva, the Russian Black Sea Fleet’s flagship. Lithuania has invested into the new Palyanytsya missile (Levyy Bereh, October 23). Additionally, US military company Anduril successfully tested new drones in Ukraine, capable of flying for 40 minutes with a range of 12 miles (The Kyiv Independent, October 10).

Drone production is an essential aspect of Ukrainian cooperation. US company AeroVironment signed an agreement to produce the Switchblade 600 drone in Ukraine (Mil.in.ua, October 2). German Vector drones are assembled in Ukraine where the company has a research and development center focused on AI-based navigation systems (Kyiv Post, September 19). Germany company Quantum-Systems has opened two factories which can build 1,000 drones each year, French company Turgis and Gaillard is producing the Aarok drone, and Slovakia is cooperating with Ukraine on producing the long-range ACS-3 (Raybird-3) drone (Quantum Systems, April 28; Europmaidan Press, July 30; Ukrainska Pravda, October 4). The Netherlands is investing $440 million into advanced drone production (The Kyiv Independent, October 7). Funding comes from the European Peace Facility, which reimburses costs to EU members who purchase arms for Ukraine, profits from frozen Russian assets, and government budgets (European Commission, July 26).

Joint projects between Ukrainian and European companies are another integral part of this cooperation. UK-Ukrainian cooperation is being conducted by Cook Defense Systems, BAE systems, and Boeing (Mil.in.ua, February 26; BAE Systems, April 10; Euromaidan Press, July 23). Denmark is investing $628 million into a Danish-Ukrainian investment fund to support companies producing military equipment in Ukraine (RBC-Ukriane, September 29).

Türkiye’s military cooperation with Ukraine predates the 2022 invasion with Ukrainian jets used by Turkish Bayraktar drones and KAAN fighter jets. The Kizilelma, a new Turkish drone, uses a Ukrainian engine. With a $100 million investment, the Turkish company Baykar Makina is completing construction of a plant, service center and head office employing 300 in Ukraine to build Bayraktar drones. Ukraine built the Hetman Ivan Mazepa and Hetman Ivan Vykhovskyy corvettes in Türkiye (Rubryka, July 11).

Ukrainian President Volodymyr Zelenskyy is taking important steps to realize his plans that Ukraine can become “a very strong player in the global arms and defense technical market” (President.gov.ua, October 1). As Ukraine develops its military-industrial complex it is both enabling itself to become more independent and self-sufficient while building closer ties with Western countries through defense industry cooperation and innovation. 

Ironically, if Russian President Vladimir Putin launched his invasion with the hope of returning to a “golden Soviet era,” it has worked but not in the way he intended. Russia’s military aggression is leading to Ukraine returning to its Soviet roots of being a major defense production hub.