On brink of defence exports: how not to hang yet another set of bars on window of opportunity for Ukrainian arms manufacturers
Will foreign arms export missions become new bureaucratic barriers and corruption feeding troughs?
Ukraine has taken a political decision to resume exports of surplus defence products. President Volodymyr Zelenskyy recently made a series of statements on this, emphasising that by the end of the year, an export model should be up and running through so-called export missions. According to the president, the first such offices will be opened in Denmark and Germany, with the next step being their launch in the United States and countries of the Global South.
One of the main security emphases in the president’s statements is that arms exports must be strictly controlled by the state so as not to undermine its defence capability during the war and to prevent Ukrainian weapons and technologies from ending up in the "wrong" hands. From the president’s statements, it is clear that control will be one of the main functions assigned to these export missions.
Ukrainian arms manufacturers stress that if the state has decided to exercise control, it must, first, prevent the creation of artificial barriers to exports, and second, refrain from interfering in business operations. Previous experience with domestic special exporters shows that such interference often results not in assistance, but in attempts by those involved to "get a cut" of the cash flows.
Almost all arms manufacturers we have managed to speak to agree that they do not need "intermediary representations" abroad. What they need is for the state to keep away from their operational and financial flows. Every new state layer means delays, duplication, corruption risks and information leaks – in other words, a de facto resurrection of the old "special exporters" under a new label. What business needs instead is digitalized procedures, transparent and binding deadlines, a "one-stop shop" and fast licences, so that companies can sell directly, receive payments quickly and reinvest them in R&D and scaling up – which directly translates into technological superiority and higher effectiveness on the battlefield.
More details on the prospects for exports of Ukrainian arms and the possible pitfalls of creating export missions can be found in our report.
What is known about the idea of export missions
The signal that Ukraine was genuinely resuming exports of its defence products was first sent in President Volodymyr Zelenskyy’s address to journalists on 20 September. At that time, he also promised to present, in the near future, so-called "export platforms" through which this process would take place.
"The first priority is the front, supplying our brigades; the second priority is our Ukrainian arsenals; and only the third priority is such controlled exports. Within two weeks, a concept will be presented – three new export platforms," the president said at the time.
Later, at a briefing on 3 November, he disclosed some details, announcing the opening by the end of the year of two export missions – in Denmark and Germany.
"The first two capitals (this has been agreed at the level of the companies that will be involved in co-production, as well as at the state level) where our missions will be located are Berlin and Copenhagen. This will happen this year," Zelenskyy said. At the same briefing, he added that coordination of the activities of such missions in Europe would be handled by Oleksandr Kamyshin (who currently serves as the President’s adviser on strategic issues).
Further clarity on the idea of the missions came from a meeting chaired by Secretary of the National Security and Defense Council (NSDC) Rustem Umerov with the participation of Oleksandr Kamyshin, some of the messages from which were later made public.
Thus, the missions, or export offices, are intended to serve as a kind of showcase for promoting Ukrainian technologies, a place where it will be possible to see first-hand how Ukrainian weapons work. In addition to this showroom function, they are also expected to act as a platform for building cooperation with foreign governments, their armed forces and businesses.
Each such office is expected to have three zones: an open area for the general public designed for demonstrations; a closed area accessible to military specialists; and an office area for negotiations and signing contracts. The format in which these offices will operate envisages both public communications and technical and business components.
The Ukrainian version of the missions is a format that remains far from clear
Serhii Honcharov, Executive Director of the National Association of Defense Industries of Ukraine (NAUDI), believes that the principles governing how the export missions will operate have not yet been defined. However, he does not rule out that they may be given excessive oversight powers.
"In fact, no export model has been proposed so far. As for the missions, there is some discussion about their status. I have not yet seen any regulatory changes, nor any amendments to the legislation that currently governs exports of defence or dual-use products. So, for now, it is hard to say what this might mean for us, other than that the state is once again trying to control something. Recent events show us just what a very ‘good regulator’ and very ‘good organiser’ our state is. What they regulate and organise is by no means always positive. Yet, for some reason, this overwhelming urge to regulate and organise never goes away," Honcharov says.
The idea of export missions is also treated with some caution by Mykhailo Tsymbaliuk, First Deputy Head of the Verkhovna Rada Committee on Social and Veterans’ Policy and Deputy Chair of the Temporary Investigative Commission (TIC) on violations in the defence sector.
"Of course, we clearly need guarantees that the products we export will not end up in the aggressor state or in countries aligned with it. And that is probably why this idea of setting up such missions emerged in the Cabinet of Ministers. I personally have not yet seen a concrete model (of how they would operate), but I have already heard warnings from businesses that they do not yet understand why these structures are being created. We discussed this with the current defence minister, the former prime minister, and talked about the need to ensure that these do not once again become unnecessary extra layers and corruption feeding troughs. Because examples of creating similar layers, all sorts of ‘nannies’ and so on, show that they by no means always work in a business’s favour," Tsymbaliuk argues.
In addition, the MP believes there are also questions about whom these missions would report to.
"In my view, this issue should be handled by the defence minister, who has the relevant experience – but not by Kamyshin, who has now to some extent lost the trust of business. As an adviser, he does not, in my opinion, have the powers needed to make decisions. "Because an adviser, forgive me, is a (position) without responsibility, without specific duties," Mykhailo Tsymbaliuk notes.
Ukrainian weapons developers agree that Ukraine has little choice: either open up arms exports, or risk losing weapons manufacturing in the country altogether.
"In today’s war, the pace of technological and organisational innovation is extremely high. These innovations change both the situation on the battlefield and the very logic of the war every week," notes Pavlo Haidai, coordinator of a team developing robotic air defence systems.
According to him, it is no longer enough for us simply to have production facilities on our territory capable of manufacturing the required quantities of weapons, ammunition and equipment. In a modern war, all conventionally produced items become obsolete and lose their effectiveness very quickly.
"In today’s conditions, Ukraine must have the capability to rapidly design and manufacture cutting-edge, innovative weapons. Such a capability, in particular, requires a domestic Ukrainian engineering school, Ukrainian research centres and domestic production. Engineering education, research centres and production facilities need constant funding, which is only available if defence manufacturers can sell their products. Therefore, for the sake of its own security, the state has no right, directly or indirectly, to restrict the sales of products made by Ukrainian defence manufacturers. Yet such restrictions do exist. So, in my view, our state has little choice: either open up opportunities for exports, or lose Ukrainian defence manufacturers and research centres, which will inevitably emigrate to countries with a better business environment. That is why Ukrainian defence manufacturers are demanding that arms exports be opened up – and that is why the Ukrainian state must open up exports," Haidai concludes.
Arms export missions: international experience
The practice of exporting arms through government export missions or offices is nothing new globally. Such structures operate in a number of countries that have established themselves among the leading arms exporters, Mykhailo Rudomynskyi told our outlet. He is a board member of the Ukrainian Council of Defence Industry and co-founder of Himera, which successfully promotes the eponymous Himera secure communications system on the market.
"Missions in partner countries can be seen as official government channels designed to maintain coordination between states, ensure end-user verification and oversee the fulfilment of post-delivery obligations. Similar mechanisms exist in many countries, but each state builds its own model based on its needs and the context of a given period.
The functions such offices usually perform – interaction with government bodies, coordination of supplies, end-user control and securing political support – are in line with the practice of international agencies that handle defence exports. There are various models around the world: for example, the DSCA in the United States, the DGA in France or SIBAT in Israel, and each of them combines technical, legal and political aspects of its work in its own way. In some countries, these bodies have broader commercial powers; in others, they focus mainly on G2G guarantees, post-delivery controls and end-user verification, and so on," Rudomynskyi explained.
A similar view of how export missions operate abroad is offered by Yaroslav Filimonov, CEO of Kvertus, a company known for its distinctive developments in electronic warfare and signals intelligence (EW and SIGINT).
"An export mission is a kind of ‘single window system’ set up and maintained by the state to sell weapons and coordinate contracts between national manufacturers on the one side and foreign buyers on the other. Its main functions include, first of all, promoting products and finding clients. In practice, that means marketing, trade fairs, B2B meetings and lobbying at the state level. And this is absolutely the right approach overall, because it is the state that should be the primary driver of arms promotion, regardless of whether the manufacturer is private or state-owned.
In addition, such missions can be tasked with initial vetting of potential counterparties and assisting with the licensing process. They can also provide state guarantees – in other words, if weapons are sold with state involvement, the state vouches for us. Beyond that, they may offer various forms of diplomatic support, help with logistics, after-sales service, training, post-delivery monitoring of end use, and so on.
As for foreign experience, in the United Kingdom, there is UK Defence and Security Exports. This body helps companies enter other markets, coordinates export policy and legislation, and coordinates the overall roadmap – the path a manufacturer must follow to move from the UK into another country. A similar institution exists in the United States – the Defense Security Cooperation Agency (DSCA), although there is, in general, quite an extensive system of bodies there for engaging with international partners. Australia and other countries also have similar bodies. So this is essentially an international practice that our country is now trying to adopt," Filimonov believes.
Key advantages and risks of introducing export missions from a business perspective
If we consolidate the views of the miltech businesses interviewed by the outlet, the export mission model may offer advantages (if they operate within clearly defined limits and focus on supporting manufacturers) but also carries significant risks (if it leads to additional bureaucratic procedures and interference in business processes).
In this context, it is crucial to ensure maximum transparency of all processes, stresses Mykhailo Rudomynskyi.
"Missions can reinforce state-level guarantees and open access to government-to-government (G2G) cooperation tools, but they do not replace the role of the manufacturer itself, who remains key to the technical, engineering and commercial support of a contract. Among the advantages of this approach, we see increased trust from partners thanks to end-user verification, the presence of control mechanisms (including inspection rights and re-export restrictions), the possibility of political support at government level, as well as organisational support after delivery or during localisation of production.
State-facilitated intermediation, provided there are transparent rules and proper oversight, can become a useful tool for expanding export opportunities and strengthening security guarantees. Within the professional community, there is a general understanding that state involvement can boost partner confidence, support post-delivery control and open up new markets. At the same time, colleagues emphasise the importance of clear public criteria, predictable procedures, external audits and effective accountability mechanisms – to avoid unnecessary delays or excessive bureaucratic burden," Rudomynskyi notes.
Pavlo Haidai adds that when it is not about corruption and restrictions, Ukrainian bureaucrats are incapable of doing anything well.
"Even under pressure from Ukrainian defence manufacturers, they try to control things that do not need to be controlled and put up barriers where they are not needed," Haidai stresses.
Yaroslav Filimonov, for his part, believes it is right to limit the missions’ involvement in the financial side of contracts.
"It is important that such missions do not have access to, and are not direct parties to, the contracts. They can act as lobbyists, as a form of marketing, as guarantors – but they should not have access to cash flows or to the terms of the contract. That must remain strictly between the manufacturer and the buyer – whether that is a state, a ministry or, for example, a security agency. Because if these offices gain access to the financial flows and financial terms, there is a high risk that they will turn into the same special exporters we used to have, which were mandatory and simply imposed their own conditions," Filimonov says.
Serhii Honcharenko was somewhat more categorical in his assessment of the potential role of export missions. In his view, such "auxiliary structures" are more likely to harm exports than help them. He also warns against duplication of functions, particularly oversight functions, since Ukraine already has effective mechanisms for controlling military exports.
"In my opinion, the main thing the state should do is not interfere. We have already had a great many programmes to support various types of business. But they usually led to someone simply receiving certain preferences while the rest shut down. And then those who received the preferences ended up shutting down as well. Because this approach is not effective in general. I believe that the best party to present a product is the manufacturer itself, directly.
All the more so because there is already an existing mechanism for protecting state interests and controlling exports. We have the State Service for Export Control (SSEC), which regulates the procedure for exporting defence goods and dual-use products. We have an interdepartmental commission which has finally updated its regulations and may even have started operating. For every export request, they obtain a pile of approvals from the Security Service of Ukraine (SBU), the Foreign Intelligence Service, the Defence Ministry, the Economy Ministry and the Foreign Ministry. So this system is already functioning," the NAUDI head notes.
Pavlo Haidai, coordinator of a team developing robotic air defence systems, describes state missions abroad as another corruption barrier for Ukrainian arms manufacturers.
"This is yet another attempt to limit the ability of Ukrainian companies to determine their own future, their own markets and their own clients. Throughout all 11 years of war with Russia, and the last three and a half years since the start of the full-scale invasion, Ukrainian entrepreneurs who create military products and military innovations have been discriminated against by our state. So why should we believe that additional state structures, now being referred to as ‘foreign missions’, will help Ukrainian producers of military products? And no matter how much we are told about the exhibition and representational functions of these state missions abroad, in essence they are a means of restricting and controlling the activities of Ukrainian defence manufacturers," Pavlo Haidai says.
Dmytro Khvylia, founder of the company Ukrainian Armor, also opposes the introduction of additional bureaucratic procedures, particularly in the context of exports of armour protection products.
"We support controlled but rational exports, without unnecessary barriers and without intermediation that does not add value. We hope for a review of regulations in line with international practice – this would allow the sector to develop, maintain competitiveness and at the same time strengthen Ukraine’s defence capability. We fully understand and support the state’s right to know what is being exported from and imported into its territory. This is a normal international practice. But bureaucratic barriers and complex licensing procedures for our product category – protective equipment rather than strike systems – have no logical justification," Mykhailo Khvylia stresses.
The state should listen to business
What the vast majority of experts interviewed by the outlet agree on, in the context of developing an optimal export model, is the need to involve weapons manufacturers themselves directly in the discussion. One option is to establish direct communication between existing associations of defence manufacturers and the relevant institutions – for example, the SSEC and the interdepartmental commission – as well as the ministries and agencies responsible for drafting regulatory documents.
"I believe the state needs to invite representatives of this sector for a frank conversation, study their proposals and only then make final decisions. This is a workable mechanism. It is very good that we already have associations and civil society organisations at the level of professional communities working in weapons and ammunition production. These are people who see the problems from the inside, who clearly know who is actually working and who, forgive me, is just waiting to win a tender somewhere and then disappear along with the money – and who can respond to such cases," says Mykhailo Tsymbaliuk.
For his part, Yaroslav Filimonov notes that they will "advocate for a clear, transparent dialogue, so that the roadmap (on implementing exports – ed.) is spelled out in as much detail as possible and is understandable for any manufacturer."
Want to sell weapons effectively abroad? First, do your "homework"
Against the backdrop of the idea of foreign export missions, whose future usefulness remains in doubt, many domestic problems remain unresolved – and the effectiveness of arms exports directly depends on addressing them. In Yaroslav Filimonov’s view, an effective way to tackle these issues would be to introduce a kind of business-style approach in the work of Ukrainian government bodies.
"The first thing that needs to be done on exports – and in general in the field of arms trade – is to digitise the entire expert review procedure (of the submitted documentation – ed.). This would allow us, as manufacturers, to see and understand the status, communications, timelines, responses and so on. In practice, this would eliminate about 70% of the bureaucracy. Right now, we simply do not see how processes are unfolding," Filimonov says.
The next step, he says, is to introduce clear timelines for all government bodies involved in the process. Roughly speaking, due diligence on a counterparty should take up to 10 days, issuing a permit 10–15 days, extending or amending conditions 5 days, and so on. At the same time, these deadlines must be legally binding so that officials and agencies bear some responsibility; otherwise, the deadlines will simply be missed.
Another important step, Filimonov says, should be the creation of a single coordination body that manufacturers can turn to. This would mean that a manufacturer would not have to go separately to the Defence Ministry, the SBU, the Foreign Ministry, the SSEC, and so on, but could submit all documents through a single "one-stop shop".
Finally, Filimonov says, it is long past time to update the regulatory framework, both in terms of the list of goods that can be exported and, more generally, to put the different types of exports on a clear legal footing.
"Among the priorities, we need to update the list of dual-use goods and military materiel, which is now completely outdated and irrelevant. Modern products such as drones and the latest electronic warfare (EW) systems simply do not fit into the existing classification. Take ‘trench EW’, for example – until very recently, this concept did not exist at all. We also need to differentiate approaches to different types of exports. Today we have exports of technologies, exports of components, exports of finished products, software and service support. There is, finally, cooperation and R&D. In other words, the very notion of a ‘product’ is now much broader and more diverse, and this calls for new approaches," Filimonov stresses.
Among other steps, Filimonov believes it is important to introduce state-level protection of Ukrainian manufacturers’ intellectual property and to involve state bodies in auditing the end users of Ukrainian military products.
Mykhailo Rudominsky generally agrees with him.
"The current legislative framework, as well as the updated roles of the SSEC, the Interdepartmental Commission on Military-Technical Cooperation and Export Control (MTCEC) and the National Security and Defense Council (NSDC), ensure collegial decision-making and an adequate level of oversight. At the same time, in practice manufacturers may face complex procedures, lengthy approvals and an insufficient level of digitalisation of certain processes. In this context, potential areas for improvement include further unification of procedures, the creation of a digital platform for submitting and tracking documents, the introduction of clear and publicly available review timelines, and the application of a risk-based approach to less sensitive products.
We believe that such steps can support the responsiveness and competitiveness of Ukrainian manufacturers while maintaining high standards of security and compliance with international practices," the Himera founder concluded.
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To sum up, Ukraine currently faces a number of significant unresolved domestic problems that hinder the effectiveness of arms exports – the need to simplify permitting procedures, digitalise processes and update the regulatory framework, among others.Resolving these issues will determine both the overall speed of procedures and the future KPIs of domestic defence manufacturers, their profits and, consequently, their ability to provide more effective support, including to Ukraine’s Defence Forces.
At the same time, the idea of introducing additional external state structures into business raises questions, the most important of which is whether they will become real helpers for business or turn into another set of mandatory "crutches" for it, similar to the special exporters operating until 2022. In this context, it is worth mentioning the dozens of criminal cases involving hundreds of millions of dollars in which officials of such special exporters are involved.
It would therefore be advisable to clearly define the remit of such export missions, shielding business processes from their interference.
To build an effective operating model for these missions, the state should establish a dialogue with business, particularly with sectoral industry associations.
Serhii Bondarenko
