Ukraine's Defense Industry Evolution: A Gateway for Innovative Cooperation?

June 24, 2024
Ukraine's battle-proven defense sector is not only of strategic importance for the country but also carries the potential for new tech synergies.

UkraineWord spoke with Valentyn Badrak, Director of the Center for Army, Conversion, and Disarmament Studies, about the achievements of Ukraine’s defense industry, what it can offer to its partners, prospects for cooperation, and the challenges it faces.

The Ukrainian defense industry has much to offer

Firstly, it presents an opportunity to jointly manufacture battle-proven weapons.

Secondly, Ukraine has a well-established traditional arms markets, and together with Western companies, these markets can be expanded, leading to increased production volumes. This holds an immense promise for the development of cutting-edge technologies and the introduction of new equipment.

Thirdly, such cooperation is a step towards bolstering global security, as it creates an opportunity to displace Russia from the global arms market.

Now, to delve deeper into the details of each point. The active production of weapons in Ukraine commenced in the summer of 2022, marked by the emergence of an "army of drones" on the initiative of the Ministry of Digital Transformation and spearheaded directly by Vice Prime Minister Fedorov.

The second wave of development unfolded in June 2023 when the President appointed a new head of the Ministry of Strategic Industries, granting the green light to produce everything possible.

However, even before mid-2022, despite the fact that Ukraine’s army scarcely purchased anything for itself from local producers, the Ukrainian defense complex possessed valuable developments.

Firstly, although Ukraine inherited few facilities from Soviet times capable of producing complete weapons systems (only 10% of all defense products could be manufactured in Ukraine through a full production cycle, such as military transport aircraft, tanks, and some radar systems), it maintained a powerful base dedicated to the maintenance and servicing of all types of weapons, even those not produced within the country. These encompassed more than three dozen repair plants.

Secondly, Ukraine possesses production facilities for crucial components, such as aircraft engines, gas turbines for military ships, aircraft weapons, and air-to-air missiles, etc.

This gave Ukraine a foothold in the global arms market. Through contracts from the global market, it fostered the development of specialised production centers that previously did not exist within the country.

For instance, even before Russia’s 2014 aggression, a center for light armored vehicle production was established and Ukraine commenced the manufacturing of armored personnel carriers and light armored vehicles. Tracing back to the early 2000s, Ukraine developed a specialsed unit for producing anti-tank missile systems.

Fueled by domestic investments, a center ofunmanned aerial systems emerged. Currently, up to 200 enterprises are operating within this field. A center of ground robotic systems has also taken root, with more than 20 enterprises actively developing these systems.

There is even a newly-created center of electronic warfare, giving rise to powerful Ukrainian-made systems such as "Bukovel" (Proximus) or "Anklav" ("Ukrspetstechnika"). Maritime drones have similarly emerged as a welcomed consequence.

A center of self-propelled artillery production has also blossomed. Ukraine's "Bohdana" self-propelled artillery, which existed as a single unit before the war, is now being manufactured at a rate of up to 8 units per month. This production rate is on par with the French "Nextera," which produces the similar "Cesars" self-propelled artillery systems.

All these specialised center continue to evolve and advance. For instance, Ukraine is currently engaged in developing its own anti-aircraft missile system and, the potential for domestically-manufactured helicopters is being discussed.

The proof of this is that, at the Motorsich plant, production lines for gearboxes and blades have been established, while defense companies have developed a controlled weapons system specifically tailored for helicopters.

Powerful examples of modernization

For instance, after undergoing modernization, the old Soviet-era S-200 anti-aircraft missile systems can now be effectively employed at ranges exceeding 300 km. Notably, it is a known fact that a Russian long-range bomber Tu-22M3 was successfully taken down at a distance of 308 km by this modernised system.

Significant modernisation efforts have been directed towards rocket artillery systems, driven by state orders. Systems across all three calibers available in Ukraine have undergone comprehensive modernisation.

The "Vilkha-M" stands out as the most advanced system, boasting a range of 110 km. Other notable systems include "Bureviy," an upgraded version of the BM-27 "Uragan," and "Beret," a formerly known as the "Grad."

Furthermore, it’s worth highlighting Ukraine's coastal missile system, the 360MTs "Neptun" cruise missile system, with an operational range of 80 km.

Ukraine's modernized rocket artillery capabilities are on par with the enemy. For example, the "Vilkha-M" is comparable to Russia's "Tornado-S" system – a newly developed system that entered serial production in Russia only in 2022.

A significant advantage of Ukrainian defense industry products is that they have been battle-tested in real war conditions and this could bring robust demand in the global arms market.

Foreign companies are coming to Ukraine

Ukraine is already reaping the benefits of five joint ventures currently in action. Notably, the German concern Rheinmetall, which harbors ambitious plans for a Ukraine-Rheinmetall future.

The German-French consortium KNDS has also reported of its intentions to develop a new Ground Combat System in collaboration with Ukraine.

And, of course, the Turkish company Baykar has already established a presence in Ukraine, and according to a statement from its CEO in February 2024, within a year, the enterprise will be operational.

Cooperation between Ukrainian and foreign companies is viewed as mutually beneficial. Ukraine possesses its traditional markets, while partners have their own established networks.

This synergy will allow for an expanded geographic reach for supply chains and presents an opportunity to supplant Russia's presence in numerous markets, which is crucial in the context of curbing its technological influence.

There are clear benefits for Western companies to produce arms in collaboration with Ukraine. For instance, sea drones, ground robotic systems, and certain types of unmanned aerial systems - they are relatively inexpensive to produce, allowing for significant scalability in production.

The same applies to air defense systems. There is already a powerful Ukrainian-American FrankenSAM project underway, involving the adaptation of American missiles to Soviet-made anti-aircraft missile systems. Another example is the adaptation of Western-made missiles, namely the "Storm Shadow" and "Scalp," to Soviet-made Su-24 bombers.

This approach itself indicates that Ukraine possesses a potent technological base, as it combines the capabilities of Western weapons with its own.

Since the start of the war in 2014, and especially after the full-scale invasion, new compact private enterprises have begun to emerge, typically employing between 100 and 1,000 people.

They operate in a new format, distinct from the functioning of the old large enterprises, such as "Antonov," where 9,500 people worked before the full-scale invasion, which was less effective.

Thus, the Ukrainian defense industry, especially its private sector, is well-prepared to cooperate with the Western world and is an asset for the West.

Challenges of the defense industry

The state has not yet completed the reform of its defense sector. An international approach involving share exchange should be applied.

Currently, state enterprises are being transformed into joint-stock companies, but there are no industry holdings. For instance, an industry holding for radar systems was proposed, intended to include 20 enterprises. However, this plan did not materialise.

One major issue is that management is done manually and that hinders the state sector. And then you have the fact that, the state sector competes with the private sector.

Private sector representatives complain that for international cooperation,while the state primarily promotes its own enterprises, which in turn face the problem of lack of reform.

Establishing well-structured public-private partnerships would significantly advance technological development. An example of this is the production of drones.

It is private companies that are more attractive for cooperation with Western partners and their products account for about 70% of defense force purchases In Ukraine.

Large state-owned defense enterprises need optimization. They possess vast, underutilized territories, whereas private companies are more compact, flexible, and capable of effective cooperation.

The key need now is to optimize the state sector's functioning and build a system that fosters effective partnerships between state and private enterprises.

Valentyn Badrak, Director of the Center for Army, Conversion, and Disarmament Studies