Ukraine’s defense industry says it is prepared to produce much more weaponry than it is currently making. The problem is that the Ukrainian government can’t afford the multi-billion-dollar price tag for production.
But it says there’s a straightforward solution.
Ukraine’s defense industry has boomed since Russia launched its full-scale invasion of Ukraine, with manufacturers ranging from huge outfits to small companies based in people’s garages. These companies are crucial, especially at times when Western support is uncertain.
The host of defense companies that have sprung up over the last three years of war has allowed Ukraine to innovate quickly and make weaponry that is well suited to the country’s specific fight, and their insights into the demands of modern war have many Western companies keen to collaborate and learn from them.
Ukrainian Minister of Strategic Industries Herman Smetanin shared earlier this year that “the capabilities of the Ukrainian defense industry have grown 35 times over the three years of the invasion,” up from $1 billion in 2022 to $35 billion now.
Industry bodies, each representing around 100 Ukrainian defense companies, told Business Insider that the country’s industry is ready to make far more weaponry if someone can fund it, and said it would be a win-win for allies.
Ukraine can make much more with more funding
Serhiy Goncharov, the CEO of the National Association of Ukrainian Defense Industries, which represents around 100 Ukrainian companies, told BI that Ukrainian producers’ capacity is more than three times as large as their purchasing power from current budgets.
He said Ukrainian defense companies get contracts worth around $11.5 billion, but they have the capacity to make as much as $45 billion in weapons.
“We are ready to increase our production. We have the capacity to increase our production,” Goncharov said. But for now, “we still work in the limit of the budget of Ukraine.”
Government officials have shared similar observations. For instance, Oleksandr Kamyshin, then Ukraine’s minister of strategic industries, said in April 2024 that Ukraine’s defense production capacity was three times as much as its defense budget.
Ihor Fedirko, the CEO of the Ukrainian Council of Defence Industry, a body that represents more than 100 companies, told BI “there are huge spare manufacturing capacities.”
Ukraine’s defense companies typically rely on money from the government buying their goods for the military. Units also buy some weaponry and items themselves, but that practice doesn’t add up to the same scale or offer businesses the same confidence.
Ukraine’s government only has so much money, particularly during wartime.
A way to fix the problem
Ukrainian industry figures outlined a simple solution, one that is already underway on a smaller scale. It’s a new way of supporting Ukraine that was launched by Denmark last year.
The model, nicknamed the “Danish model,” buys weapons for Ukraine directly from Ukrainian developers instead of purchasing them from European or US companies or taking them from other countries’ stockpiles.
Goncharov described actions similar to the Danish model as the “simplest” way partner nations can help Ukraine’s industry and the one that gives the “fastest result on the battlefield.” He said this approach allows Ukraine to increase its production by giving manufacturers financial assurances and confidence.
Multiple countries have joined this model, and some others, like Germany, say they are working on their own version of it.
The Danish model ensures weapons reach Ukrainian soldiers faster and typically for less money. It also means the weaponry Ukrainian forces need most is prioritized. Goncharov said it helps Ukrainians get “exactly what they need on the battlefield.”
Through this approach, even if a partner country has limited stockpiles or a limited defense production capacity, it can still “purchase the artillery for Ukraine from Ukraine.”
Around $550 million worth of weapons procurements were finalized last year and boosted the production of key weapons like the Bohdana self-propelled howitzer.
Goncharov said Ukraine’s industry has a list of weapons it is ready to increase the production of if it gets money through this type of model. That list includes artillery and armored vehicles.
Fedirko said the Danish model is “the largest hope for the private sector.” Other options include using frozen Russian assets and joint manufacturing opportunities with foreign companies.
The Danish model isn’t the only option
Goncharov said he has discussed the Danish model and other options for producing more Ukrainian weaponry with members of the European Commission.
Another model he proposed is financing production in Ukraine that depends on a substantial amount of European components. He said many Ukrainian companies import some components from elsewhere in Europe, like some metals and vehicle chassis.
He described this as “more complex” and more medium-term than the Danish model, but it’s one solution that also benefits European industry, which is ramping up.
Europe is watching the war in Ukraine closely, with many countries massively boosting their defense spending and warning that Russia could attack elsewhere on the continent.
Countries are hesitant to drain their stockpiles, and new defense orders are creating backlogs in industry, limiting its capacity to produce weapons for others.
Many European countries are studying Ukraine’s defense industry and its speed, but it’s a work in progress.
Goncharov said many of Ukraine’s international partners are not expanding their defense production fast enough, so Ukraine’s industry “has no other options only to grow, to cover our demand.”
He said working with Ukraine is advantageous for other countries attempting to improve their defenses. They can learn from Ukrainian companies with the advantage of being in direct contact with soldiers and units, allowing them to stay up to date with what is needed against Russia and test their products.
“We unfortunately face this situation when we have war on our territory, and it’s not our choice, but it is what it is.”
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