In recent months, Ukraine’s defense industry has faced significant hurdles in its efforts to engage in international arms exports. Despite government assurances of an open export market, many companies report receiving rejections from the State Export Control Service of Ukraine (SECU) without clear explanations. This situation arises even as a substantial number of these firms have expressed interest in collaborating with foreign partners.
The Ukrainian government aims to leverage the unique capabilities of its defense industry to strengthen strategic partnerships, particularly as the country integrates further into the Euro-Atlantic community. However, industry stakeholders emphasize the need for expedited processes that do not compromise current operational capabilities.
With the announcement of initial contracts under the “Build with Ukraine” initiative and opportunities for local manufacturers to showcase their products in the Middle East through “Drone Deals,” attention has shifted to developing various export models. Both new entrants and established companies in the defense sector are grappling with a lack of clarity regarding the mechanisms for export.
The global defense landscape is currently undergoing a significant transformation, driven by rising demand amid geopolitical instability. According to the Stockholm International Peace Research Institute (SIPRI), global defense spending is projected to reach $2.88 trillion by 2025. This growing demand presents a unique opportunity for Ukraine, which has developed advanced military technologies, particularly in drone warfare and electronic warfare.
However, delays in establishing effective export channels have led some manufacturers to relocate operations to Europe, while foreign companies capitalize on Ukraine’s combat experience. For instance, the introduction of American-made intercept drones, which have been tested in Ukraine, underscores the risk of losing market share to international competitors.
For Ukraine’s defense industry to thrive and contribute to the national economy, establishing a streamlined export process is crucial. The current delays hinder progress toward this goal, potentially stalling economic growth.
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Export viability is essential for the survival of Ukraine’s defense sector, which has expanded to approximately 900 companies and over 300,000 employees in recent years. The industry’s production capacity has increased fifty-fold, yet the ability of the government and international partners to secure contracts has not kept pace. This gap could lead to underutilized facilities, stalled research and development, and a loss of skilled labor.
Successful defense industries in countries like Turkey, South Korea, Israel, and Norway demonstrate that effective national defense production cannot exist without export capabilities. The Israeli security model, for example, combines a robust defense sector that meets domestic military needs while also capturing international markets. Ukrainian products currently benefit from proven battlefield effectiveness and competitive pricing, which raises concerns among established defense manufacturers.
Discussions surrounding export often focus on security risks, such as technology leaks and end-user controls. While these concerns are valid, they may be somewhat overstated, given that adversaries already have access to many battlefield technologies. Procedural barriers also hinder progress, as a significant number of manufacturers have refrained from applying for export licenses due to unclear procedures and a lack of step-by-step guidelines.
Three potential export models are under consideration: joint ventures under the “Build with Ukraine” initiative, direct exports to partner countries under security agreements, and technology exports. However, the legal framework for both the “Build with Ukraine” initiative and the “Drone Deals” remains undeveloped, creating uncertainty for companies looking to enter the market.
To address these challenges, stakeholders propose two key actions for the government. First, there needs to be better coordination among state institutions involved in defense policy, clarifying roles and responsibilities to facilitate effective planning for international activities. Second, establishing transparent and clear export mechanisms, along with a solid legal framework, is essential.
Currently, export regulations are fragmented, often relying on discretionary decisions by officials. Companies require clear guidelines, including criteria for participation, necessary documentation, and timelines for processing applications.
As demand for Ukrainian defense products may decline after the active phase of the conflict, it is crucial to capitalize on the current window of opportunity. Delays in establishing effective export mechanisms could result in lost contracts, investments, and production capabilities relocating abroad. The Ukrainian defense industry supports new export mechanisms, but the critical factor remains the speed of their implementation. The government is urged to establish clear rules, define roles among agencies, and ensure equitable access for all stakeholders while the opportunity remains.
Anastasia Mishkina, Executive Director of the Technological Forces of Ukraine
Ukraine's defense sector faces significant export challenges despite government assurances of an open market. Many companies report rejections from export licensing authorities, highlighting a lack of clarity in procedures. As global demand for defense products rises, establishing streamlined export mechanisms is crucial for the industry's survival and growth.