According to SIPRI, Ukraine ranks first in the world in arms imports. This is hardly surprising: the war has been ongoing for more than four years, the demand for weapons and ammunition remains immense, and Ukraine’s partners continue to provide substantial military assistance.
At the same time, Ukraine has achieved extraordinary growth in its defense-industrial capacity. As a result, the country is now reaching a point where certain categories of domestically produced weapons could potentially be exported. This, however, is far from a straightforward issue. The defense sector is highly specialized and requires careful regulation both at the governmental level and through legislation.
Ukrinform discussed these and other related issues with Halyna Yanchenko, Member of Parliament of Ukraine (Verkhovna Rada), Chair of the Temporary Special Commission of the Verkhovna Rada on the Protection of Investors’ Rights, head of the working group on investment in the defense-industrial sector, and author of the draft law on public-private partnership.
Ukrinform: Let us begin this discussion about the export potential of Ukraine’s defense industry from the very start. Beginning in 2014 — or even slightly earlier — new players started entering the sector: private manufacturers, modern business entrepreneurs, and technology-driven businesses that clearly understood what needed to be done. Over time, the number of such companies grew significantly, and they began organizing themselves into unions and associations in order to present a consolidated position and coordinated proposals to the government and parliament. I would argue that this was precisely where the idea of returning to arms exports first emerged, gradually taking on clearer form and stronger arguments. How do you see this process?
Halyna Yanchenko: Before the full-scale invasion, Ukraine had a relatively small but stable state-run defense-industrial sector. It consisted mainly of state-owned enterprises within the Ukroboronprom structure, which focused primarily on manufacturing and repairing heavy military equipment. These enterprises were also responsible for exporting defense products.
Alongside them, there were several dozen privately-owned defense contractors. The real breakthrough — the rapid rise of Ukraine’s defense-industrial base — came after the start of the full-scale war. To understand the scale and speed of this transformation, it is enough to look at the numbers. In 2021, before the full-scale invasion, Ukraine’s entire defense sector — both state-owned and private — was capable of producing roughly $1 billion worth of military and dual-use products annually.
This year, after four years of war, the capabilities of Ukraine’s defense industry have expanded fifty-fivefold. Fifty-five times in just four years. Today, Ukraine is capable of producing up to $55 billion worth of weapons and dual-use goods annually.
No other sector of the Ukrainian economy has experienced growth on this scale since Ukraine gained independence. In many ways, it has been a quantum leap — in production capacity, technological sophistication, and overall quality.
Today, around 1,500 companies operate in Ukraine’s defense sector, and roughly 80% of them are privately owned.
This brings us to the changing priorities and the need for a new state policy — one focused not only on importing weapons, but also on exporting them. At the beginning of the full-scale invasion, Ukraine was producing far less weaponry than it required. Thanks to the combined efforts of Ukraine and its partners, the country received massive military assistance. Much of the imported equipment arrived free of charge, while some systems were procured separately.
Now, in the fifth year of the war, Ukraine’s defense-industrial base is capable of producing significantly more than the government can afford to purchase. Despite the fact that nearly all state revenues — taxes, customs duties, and other fees — are directed toward the war effort, with roughly 95% of budget spending tied to defense needs, the Ukrainian government can still buy only about one-third, or even one-quarter, of what the private defense sector is capable of manufacturing.
As a result, Ukrainian weapons manufacturers are currently operating at only 20–40% of their production capacity. Quite simply, there is little sense in producing the remaining 60% of output because Ukraine itself lacks the financial resources to purchase it.
At the same time, while exports remained restricted, companies found themselves trapped in a paradoxical situation: the Ukrainian government could not afford to buy their products, yet they were also prohibited from selling them abroad. This artificially limited the growth of Ukraine’s defense industry and produced negative consequences for both the economy and the labor market, as countless potential jobs were never created.
It also meant missing major diplomatic and geopolitical opportunities. As is widely understood, the world’s principal arms salespeople are presidents and heads of state, because defense contracts are rarely just commercial deals — they are often embedded within broader political and strategic agreements. In that sense, presidents become the key actors in the global arms trade.
Today, Ukraine’s defense-industrial base is among the most innovative and technologically advanced in the world, while still capable of manufacturing weapons systems at comparatively low cost. This is precisely the advantage that Ukraine’s leadership should be actively promoting: exporting Ukrainian-made weaponry while leveraging it to strengthen the country’s political and strategic position internationally.
UI: In fact, the President has been carrying that banner continuously ever since the Gulf War — nonstop. But we will return to that point later.
It took quite a long time for arms manufacturers to get a simple message across: Ukraine can increase production, but it needs access to external markets because that is where the buyers and investors are. That is precisely why a number of interim solutions began to emerge — the Danish model, the Swedish model, joint manufacturing projects, localization agreements. Production was also relocated abroad in some cases, though I am not entirely sure to what extent all of this was formally legal.
These bottom-up initiatives from manufacturers also had a unifying effect, eventually leading to the creation of Defense City. What exactly is it, and how does it function?
HY: Defense City is essentially a legislative initiative intended to improve coordination within Ukraine’s defense-industrial base and create additional opportunities for businesses. In reality, however, it is still only beginning to take shape.
But when it comes to exports, the key point is this: despite the de facto halt to arms exports after the start of the full-scale invasion, there was never any actual legal ban in place. That is why it makes little sense to argue that exports require some fundamental legislative revision.
Legally speaking, arms exports were never prohibited. What existed instead was a political restriction — not de jure, but de facto. At the beginning of the full-scale invasion, the President of Ukraine made the correct decision by suspending exports, assessing the country’s available resources, conducting an audit, and directing everything possible to the front line.Початок форми
It was the right decision — timely, rational, and necessary under the circumstances. But in politics, it is important not only to make the right decisions at the right moment, but also to reverse them at the right moment, once they stop producing benefits and instead begin causing harm.
Ukraine’s defense-industrial base then began expanding at extraordinary speed, driven in part by the determination of many Ukrainians to contribute to victory. People with expertise in manufacturing, business management, logistics, and production processes — specialists from a wide range of sectors — started investing in the defense industry. And at a certain point, during 2023–2024, the production capacity of manufacturers effectively caught up with the government’s purchasing capacity. From that moment on, keeping exports effectively closed began to harm not only the defense industry itself, but also the broader economy and the country as a whole.
That is why the issue of opening arms exports has long been overdue. For the past two years, I have consistently advocated revising state policy in this area. In fact, about six months ago, the President made such a decision and publicly announced the beginning of exports.
Yet despite those statements, we still do not see meaningful export activity today. Only a handful of export licenses have been issued, mostly for dual-use goods, while the large-scale promotion of finished Ukrainian military products abroad has, unfortunately, not materialized. Instead, another concept has emerged — one I do not support — namely, the export of technologies rather than products.
In practical terms, this means exporting factories: building Ukrainian-owned production facilities abroad that would manufacture Ukrainian drones and weapons outside Ukraine. In reality, technologies developed by Ukrainians, tested in wartime conditions, and paid for with the blood of Ukrainian defenders would end up being produced elsewhere. The highly skilled jobs created by these factories would go not to Ukrainians, but, say, to workers in Poland or elsewhere. Tax revenues would flow into foreign budgets rather than Ukraine’s. And eventually, the geopolitical leverage created by these industries would be used not by the Ukrainian government or president, but by the governments of Poland, the Czech Republic, the United Kingdom, or whoever hosts those facilities — the specific country is secondary.
That is why I believe the priority should be the export of finished Ukrainian products, rather than the export of technologies or the relocation of production itself.
I very much hope this approach will be reconsidered and that Ukraine will ultimately adopt a more balanced and strategically sound state policy.
UI: I believe this is part of a much broader and more serious issue — namely, intellectual property.
What does the situation look like now? Are all private enterprises in Ukraine capable of navigating this rather complex process — obtaining patents for inventions and technologies while protecting both their own intellectual property rights and the interests of the state?
HY: As far as I know, there have been no major complaints regarding patents themselves. At the same time, for any weapon system or dual-use product to be officially adopted for service, it must undergo what is known as codification — a testing and certification process designed to confirm that the product is genuinely effective and that its real-world performance matches its declared tactical and technical specifications.
Moreover, when new Ukrainian weapons systems undergo codification today, they receive not only Ukrainian certification but also a NATO codification number, which theoretically opens the possibility for exports to NATO member countries as well.
Compared with the pre-war period, the codification process has become significantly more streamlined. The government and the military are providing as much support as possible, and this is actually one of the areas where we are seeing genuinely positive developments.
UI: This is one of our advantages, but it is also temporary. Over time, things will inevitably become more complicated than they are today. Bureaucratic procedures will still exist, especially given that we are talking about integrating Ukraine’s defense-industrial base with the broader European defense ecosystem.
The goal, however, is not to eliminate these procedures entirely, but to simplify and automate them as much as possible — essentially creating something like a defense-sector version of Diia, where processes move quickly, efficiently, and with minimal bureaucracy.
HY: Yes, absolutely. We have to understand that the advantages Ukraine currently enjoys in technology and manufacturing are temporary by nature.
I regularly attend military exhibitions around the world. Last year, for example, there was a major exhibition in London — one of the largest defense expos globally. A great many European drone manufacturers were present there, and there are already quite a lot of them. Yet inside our Ukrainian bubble, we often tend to believe that we are unquestionably the world leaders in drones.
To some extent, that is true. But the rest of the world is not going to stand still and wait for us. These technologies are already beginning to spread. Foreign specialists are coming here, observing, studying our experience, and gradually adapting what they learn. Similar technologies are now beginning to emerge abroad. They may still be somewhat less effective than what is being developed in Ukraine, but that gap will not last for long.
That is why I want to emphasize once again: Ukraine needs to move quickly promote exports of finished defense products. Because within a year or two, Ukrainian drones may no longer be viewed as something unique. If we fail to act now, we risk losing this window of opportunity altogether.
UI: This is precisely what Kyrylo Budanov recently pointed out: “Ukraine is at a point where its experience, expertise, and technologies have become a global brand. But this status will not last forever.”Початок форми
We currently have a unique window of opportunity to secure a lasting niche in the global defense market. And this brings us to the broader military and geopolitical reality — namely, the war in Iran.
The conflict demonstrated that neither the United States nor the Gulf states were able to effectively apply the Ukrainian experience of countering inexpensive Iranian drones and missiles. When Volodymyr Zelensky offered to share Ukraine’s expertise in drone warfare, Donald Trump declined the proposal. Later, however, it emerged that an American company, drawing heavily on Ukrainian technological experience, had developed interceptor drones that were then actively used during the Gulf conflict. This is a good example of how things should not be handled. So what would the right approach look like?
HY: That is an excellent question. I believe the key is simply to act in time. Had Ukraine begun opening up arms exports in 2023 or 2024, we would already have established clear rules of engagement — understanding who could enter into agreements, under what conditions, and with whom cooperation would or would not be possible.
Frankly speaking, Ukraine is already somewhat late in this regard. While exports remained de facto closed, Ukrainian companies that did not receive government contracts found themselves trapped in a dead end: either they shut down and went bankrupt, or they relocated abroad in one form or another.
Several dozen companies — including some of the most technologically advanced drone manufacturers — ended up moving operations to Poland, the Czech Republic, and other countries. As a result, by the time Ukraine became ready for serious negotiations on exports and international cooperation, many of these firms had already established relationships with foreign partners and, in some cases, were no longer entirely Ukrainian businesses because they had been forced to leave due to the lack of opportunities at home.
That is why there must be open dialogue and transparency. If the government creates real opportunities and permits exports under clearly defined rules and conditions, then these problems can be avoided.
And there is another important point: arms exports are not the only strategic advantage Ukraine risks losing. I also believe the government urgently needs to regulate and authorize another closely related sphere — private military companies.
This is an extremely important and increasingly relevant topic. Just a week ago, in one of his evening addresses, Volodymyr Zelensky stated that Ukraine needs private military companies.
I very much hope that we will move quickly to legalize and establish them.
This issue is critically important. Today, approximately 1.2 million people are integrated into Ukraine’s Defense Forces. That is an enormous figure — roughly equivalent to the combined size of all the armed forces of the European Union.
What does this mean in practice? It means that Ukraine currently maintains such numbers because it is fighting a large-scale war, defending not only itself but, in many ways, Europe as a whole. Maintaining such a force requires colossal financial resources. And once the war enters a post-combat phase, Ukraine will inevitably have to reduce the size of its military simply because sustaining it at current levels will be financially impossible.
As a result, a very large number of people will leave military service. Many of those currently fighting volunteered for the war and have no intention of returning to their former civilian professions.
This creates a fundamental question: where will these people go — those who wish to remain connected to military service and security work, but whom the Ukrainian government will no longer be able to keep within the armed forces? If Ukraine fails to create opportunities and roles for them, it could become a major social challenge in the future.
That is why I believe one of the best solutions would be to begin establishing Ukrainian private military companies already now, so that these people can find professional opportunities there. In the future, such Ukrainian private military companies could operate internationally as well.
It is also important to understand that private military companies are not solely — or even primarily — about combat operations. In many cases, their main functions involve training, instruction, logistics, security support, and operational assistance. Somali piracy, for example, was largely suppressed with the active involvement of private military companies.
Ukraine already has a large number of veterans whose experience and expertise could be used in this field.
UI: And this discussion is no longer limited to private military companies alone. Even during wartime, Ukraine has already seen the first documented case in which privately operated air-defense systems successfully intercepted enemy targets.
HY: I strongly welcome this initiative. The private air-defense project was launched under an experimental resolution adopted by the Cabinet of Ministers. One of its initiators was Andrii Lobodenko, a person for whom I have enormous respect. In many ways, this can be seen as the first prototype of a Ukrainian private military company.
It is an excellent example of how private military entities can complement the regular armed forces and support the state when government resources are limited.
Moreover, this private air-defense system is effectively financed by private business. It is a highly effective model, and there is no reason why it could not eventually be used both in Ukraine and internationally.
UI: There is another important aspect you mentioned above: wartime conditions provide manufacturers with a unique opportunity to conduct immediate battlefield testing, receive direct feedback from combat units, and rapidly modify or improve their products — in some cases literally on the front line before supplying them to the Defense Forces.
This also creates opportunities for defense technology cooperation with other countries. Companies seeking to test equipment under real-world combat conditions and obtain credible certification could potentially send their systems to Ukraine for evaluation.
HY: Absolutely. This is one of Ukraine’s key advantages. I had the unique opportunity to study for some time at Stanford University, one of the world’s leading universities, located in the heart of Silicon Valley. Silicon Valley itself emerged during the Second World War and initially developed as a hub for military technologies that were later adapted for civilian applications.
Many technologies we now consider ordinary parts of daily life — including radio communications and microwave ovens — originally emerged from military research before finding civilian uses. And today, neither Silicon Valley nor any other technological center in the world is innovating, including in military technology, at the pace currently seen in Ukraine.
Why is this happening? First, because Ukraine’s weapons manufacturers are exceptionally talented — genuinely among the best in the world. Second, fortunately, the government did not miss this moment.
An experimental government resolution was adopted — and it is encouraging that this mechanism is now being actively used — allowing certain weapons systems to be deployed even before full codification. This makes it possible to test them directly on the battlefield. In many cases, soldiers provide immediate practical feedback, enabling manufacturers to improve and adapt their systems almost in real time. This gives Ukraine the ability to innovate at extraordinary speed and maintain a technological edge over the adversary.
Since this is one of Ukraine’s unique competitive advantages, it must be used strategically. Foreign companies seeking access to this ecosystem should also contribute in return. They should establish production facilities in Ukraine, invest capital here, transfer technologies, and support the development of the local defense sector. Only under those conditions should access to this environment be granted.
UI: Let us return to the point you raised above — namely, the role of the “main seller of weapons.”
Today, almost no international event involving Volodymyr Zelensky takes place without discussions of so-called “drone deals” or broader defense agreements. It is already known that five such agreements have been signed, and there now appears to be a fairly clear framework behind them. President Zelensky has said that these agreements involve the production and supply of Ukrainian drones, missiles, artillery shells, and other categories of weaponry, as well as the sharing of operational expertise. In other words, they cover almost the entire spectrum of military cooperation. What can you tell us about these agreements?
HY: These are essentially bilateral security agreements. On the one hand, it is certainly positive that they are being signed. On the other hand, as I mentioned earlier, I remain skeptical about the export of technologies themselves, because it can lead to a loss of personnel, a brain drain, and ultimately weaken Ukraine’s negotiating position. I still believe the priority should be the export of finished products — not the establishment of joint production facilities abroad, but the export of weapons and systems manufactured in Ukraine.
UI: What we are discussing is also closely tied to the broader condition of Ukraine’s economy. One of the most difficult challenges is the labor shortage, and when it comes to Ukraine’s postwar reconstruction, that problem may become even more acute.
HY: I would frame it more broadly: not merely as a shortage of labor, but as a shortage of people overall.
There is a widely accepted economic principle that sustained economic growth is extremely difficult when a country’s population is shrinking. In most cases, economic development depends on population growth.
At the same time, people matter not only as workers in factories and industries, but also as consumers. Without people, there is no domestic market; there is no one to manufacture goods for, and no one to produce them. It becomes a self-reinforcing cycle.
I still believe Ukraine has opportunities for economic development despite the country’s demographic decline, which has been exacerbated by the war and by the fact that several million Ukrainians are currently living abroad as refugees. Ukraine has suffered tragic losses, and birth rates are not rising significantly. Yet despite all of this, I believe sustainable economic growth remains possible.
The response to this challenge must involve automation, optimization, advanced technologies, modern equipment, innovation, artificial intelligence, and related solutions. These tools can help reduce the shortage of workers in manufacturing and other sectors. And when it comes to consumers and markets, this brings us back once again to the importance of exports.
If Ukraine’s domestic market has shrunk, then the country must expand into global markets and sell its products internationally. And above all, it should focus on exporting weapons. Why? First, because defense manufacturing is currently Ukraine’s most dynamic and fastest-growing sector. Second, these are products with very high added value.
As a result, this sector creates highly paid jobs and offers a real opportunity to build a strong foundation for Ukraine’s long-term economic growth and development. The key challenge now is not to miss this moment.
UI: As I understand it, you are describing a model for transferring wartime experience into civilian postwar development: advanced technologies, rapid adaptation, innovation, and the spread of domestic expertise and know-how. Realistically, there may be no alternative if Ukraine truly wants to reclaim the place it deserves in Europe. I hope that is exactly the direction the country will take.
That said, we still do not fully know what exactly Ukraine intends to rebuild first, or in what order. But perhaps somewhere in those same laboratories and workshops where drones are now being assembled, there are already people thinking about the future.
HY: I very much hope so. But for that to happen, the government must remain open, and there must be a constant dialogue between government, businesses, civil society, and intellectual communities.
That is why I am grateful for conversations like this one. Simply by raising these questions, we are already contributing to the discussion and encouraging more Ukrainians to think seriously about the country’s future.
UI: Which is precisely why these discussions should be encouraged both within the Verkhovna Rada and at the state level more broadly, involving everyone connected to this enormous national undertaking.
And perhaps one day, much of this process will be coordinated by artificial intelligence.
HY: In many respects, that is already beginning to happen. I believe that in the near future, artificial intelligence will become as fundamental a skill as knowledge of English. Just 10 or 15 years ago, English was considered a competitive advantage; today it is simply a basic requirement. I think AI literacy is quickly moving in the same direction and should become one of the foundational skills taught to children.
UI: For all of this to develop harmoniously and rapidly, peace is essential. And for there to be peace, Ukraine must achieve victory — and victory requires collective effort from all of us.
Thank you for this conversation. I hope the critically important issue of arms exports will remain firmly on the public and political agenda.
Ihor Dolhov led this conversation
Photos by Danylo Antoniuk
The conversation can be watched in full on Ukrinform’s YouTube channel