Strategic Rationale

Ukraine's push for in-country defence production stems from multiple strategic imperatives:

• Supply chain vulnerability: equipment donated from abroad must transit through a finite number of crossing points (mainly Polish border rail); longer supply lines are vulnerable and logistically expensive
• Delivery delay reduction: producing in Ukraine eliminates the weeks-long supply chain between Western factories and the front
• Technology self-sufficiency: dependence on foreign donations creates political vulnerability; every shift in Western political will directly affects combat capability
• Post-war defence industry: Ukraine intends to emerge from the war as a significant defence exporter — the combat experience and production knowledge accumulated during the war is economically valuable
• EU security framework: joint ventures with EU companies align with EU arms procurement requirements, supporting Ukraine's EU accession path

Drone Production Expansion

Ukraine's drone manufacturing is the most advanced sector of its defence industry transformation:

• Ukraine produces an estimated several hundred thousand FPV and reconnaissance drones per month — primarily through a distributed network of small commercial manufacturers rather than large state factories
• The distributed model has strategic advantages: many small factories are harder to identify and destroy than single large facilities; Russia has targeted identified drone production facilities but cannot suppress the distributed network
• Netherlands, UK, and Estonia have established joint drone production arrangements with Ukrainian manufacturers — providing components, electronics, and funding in exchange for production capacity
• Ukraine has developed indigenous long-range attack drones (Lyuty/UJ-22 family and successors) that can reach deep into Russian territory; these represent full domestic design and production capability
• Marine drone (sea drone/USV) production is entirely domestic — Ukrainian engineers designed and built the platforms that have devastated the Russian Black Sea Fleet with no Western technology transfer

Ammunition Co-Production

155mm artillery shell production in Ukraine represents the highest strategic-value industrial target:

• The EU's "invest in Ukraine" ammunition production initiative includes establishing 155mm shell production within Ukraine itself — dramatically shortening the supply chain from European factories through Poland to the front
• Rheinmetall (Germany) signed agreements in 2024 to establish production facilities in Ukraine — despite the security risk, Rheinmetall assesses that distributed in-Ukraine production is strategically necessary
• Czech firms participating in the Czech ammunition initiative (sourcing shells globally) have explored in-Ukraine component assembly as a second phase
• Ukrainian state enterprise Ukroboronprom remains a central coordination mechanism — managing state-to-state agreements and licensing Western designs for in-Ukraine production
• Propellant and explosive chemistry for 155mm shells is the most sensitive component — Western export controls and classification requirements constrain full technology transfer in this area

Armoured Vehicle Assembly

Several agreements for in-Ukraine or near-Ukraine armoured vehicle production exist:

• Rheinmetall — discussed establishing Lynx IFV production capacity in Ukraine; the facility would assemble Lynx (a modern tracked IFV) from components, eventually transitioning to more local content
• Ukraine's own Kharkiv Morozov Design Bureau and Malyshev factory — partially evacuated from Kharkiv due to proximity to the front — continue producing T-64 upgrades and the Oplot tank domestically
• BMR-3 mine-protected vehicles and various light tactical vehicles are produced domestically by Ukrainian companies; the Kozak-2 and Novator MRAP families are Ukrainian-designed and built
• A planned "heavy armoured vehicles" joint venture with a Western partner (exact details not yet publicly disclosed) was announced in 2025 as part of a broader defence industry bilateral agreement

Air Defence Production

Air defence manufacturing partnerships are among the most strategically sensitive:

• Ukraine signed agreements with several European partners for in-country assembly of short-range air defence components — reducing dependence on imported complete systems
• MBDA (European missile consortium) and Ukrainian counterparts explored licensed production of certain short-range missile components — discussions are ongoing and partially classified
• Ukraine's own Artem company produces R-60 and R-73 air-to-air missiles used by aircraft; this domestic AAM production has been maintained and expanded
• Counter-drone systems production: several Ukrainian companies now produce full counter-drone EW systems domestically — sold both for Ukrainian military use and for export

Key Country Partnerships

Challenges and Risks

• Russian targeting: Russia deliberately targets identified defence industrial facilities; several Ukrainian defence factories have been struck. The distributed model mitigates but does not eliminate this risk
• Technology transfer limits: Western export control regimes (ITAR in the US, Export Control in EU) impose significant restrictions on what military technology can be transferred to Ukraine for production — even as a partner; classified systems and certain components cannot be produced in Ukraine
• Staffing: Skilled engineers and workers are being mobilised into the armed forces; the military industry competes for the same human capital that is desperately needed at the front
• Financing: Most joint ventures require upfront capital investment — factories, equipment, training; this competes with immediate war needs for funding
• Post-war uncertainty: Western companies are cautious about major capital investments in Ukraine without clearer security guarantees — the same investments that could transform Ukraine's war economy may be delayed until after the conflict

Frequently Asked Questions