Lack of clear export model is pushing Ukrainian arms producers to move operations abroad – ESC
Drone Industry
The current arms-export control model precludes Ukraine’s strategic cooperation with international partners, hampers the development of its defense industry, and pushes Ukrainian companies to consider relocating production abroad.
This is according to a study by the Economic Security Council of Ukraine (ESC).
The study notes that the production capacity of Ukraine’s defense-industrial complex already exceeds the fiscal capacity of the state budget, while the de facto export ban is driving companies overseas. This risks the loss of orders worth billions, foreign investment, and a slowdown in economic growth.
At the same time, full liberalization of exports during wartime would pose a threat to national security, the authors of the study caution.
"Member states are now actively discussing with Ukraine and the Ministry of Defense how to organize co-production and technology transfer. We need clarity, especially with the SAFE loans approaching — €150 billion, which is a huge amount. We want to use them together with Ukrainians. But without clear rules, the window of opportunity will soon close," said Martin Jõesaar, program director at the EU Defense Innovation Office.
The Economic Security Council of Ukraine’s analysis indicates that while the current export-control system formally performs its functions, the lack of transparent procedures creates risks and requires modernization. Among the key recommended steps are:
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adoption of a single legislative framework instead of fragmented acts;
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introduction of electronic licensing via a one-stop-shop system;
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implementation of a risk-based approach with end-user controls;
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alignment of legislation with EU standards, which is also important for European integration and access to European financing programmes.
"The proposed solutions will provide a clear and comprehensible model for arms exports during wartime. At the same time, among the measures currently being discussed in the government and expert circles, it is necessary to develop secondary legislation in line with the law concerning Defence City, to institutionalise the Build with Ukraine initiative, which should become a comprehensive solution for strategic exports and industrial partnerships, and most importantly to update the strategy for developing the defence-industrial complex," said Oleksandra Azarkhina, head of defence industry development at the Economic Security Council of Ukraine.
As reported, 97% of private producers of arms and military equipment are awaiting the lifting of export restrictions in order to begin supplies to partner countries, launch joint production, and scale B2B and B2G partnerships, according to an analytical report by the Technological Forces of Ukraine (TSU) and the Better Regulation Delivery Office (BRDO).
