Ukraine’s defense sector is undergoing a dramatic transformation, as the country races to expand its weapons industry in the face of ongoing Russian aggression and shifting support from Western allies. With NATO membership out of reach for the foreseeable future, Kyiv is betting big on homegrown innovation, international investment, and a new export strategy to secure its future on the battlefield—and perhaps reshape the European defense landscape in the process.
As of September 19, 2025, Ukraine’s ambition is clear: triple its weapons production capacity, meet its own military needs, and become a key supplier to allied nations. According to the Associated Press, Ukraine’s defense industry now provides nearly 60% of its army’s requirements, a remarkable jump from just 10% at the outset of Russia’s full-scale invasion three and a half years ago. Yet, despite this progress, Ukraine’s military budget for 2024 stands at $64 billion—less than half of Russia’s spending—leaving Kyiv reliant on Western investment and collaboration to close the gap.
That collaboration is taking on new forms. In a televised address on September 19, President Volodymyr Zelenskyy announced plans to begin controlled exports of select Ukrainian weapons, including surplus sea drones and anti-tank systems, to finance further domestic arms production. "First priority is the front, supplying our brigades. Second is our national arsenals. Only third comes controlled exports," Zelenskyy said, underscoring that the move is not about "weapons charity," but a strategic tool to strengthen Ukraine’s defense capabilities. Exports will be strictly controlled, limited to allied countries with verified interest in supporting Ukraine, and designed to prevent sensitive technology from falling into Russian hands.
The plan is ambitious. Within two weeks of Zelenskyy’s announcement, Ukraine will unveil three export platforms—one for the U.S., another for European partners, and a third for other international allies. The initiative is expected to allow Ukrainian manufacturers to expand production, especially of drones that are in high demand at the front, while also covering critical funding gaps in the domestic defense sector. As the president pointed out, Ukraine can now produce some modern weapons in quantities that outstrip its own immediate needs, and international demand is strong.
International interest in Ukraine’s defense sector is not hypothetical. According to Ukraine’s Defense Minister Denys Shmyhal, 25 leading global defense companies are already expanding production in Ukraine as part of the country’s new defense hub, Defence City. Writing on X (formerly Twitter), Shmyhal described close cooperation between these manufacturers and the Ukrainian government, noting that each company is localizing production under the "Build with Ukraine/Build in Ukraine or Danish model." The goal, he said, is to ensure that the bulk of products serve the needs of the Ukrainian Armed Forces (UAF), while also enabling export and integration into global supply chains.
The Defence City framework offers a suite of incentives to attract investors: tax benefits, simplified customs procedures, mechanisms to relocate production to safer regions, expanded state financial support, and opportunities for export. As Shmyhal put it, "Ukraine is where next-generation weapons are being designed and tested on the battlefield. Investing in our defense industry today means investing in the security of all Europe."
This message appears to be resonating across the continent. European Commission President Ursula von der Leyen has publicly stated that with greater financial support from Europe, Ukraine’s army and defense industry can become a "steel porcupine," making the country less vulnerable to future attacks. Already, Ukraine is set to receive 1.3 billion euros ($1.5 billion) from a coalition of countries—including Denmark, Sweden, Canada, Norway, and Iceland—to produce artillery, strike drones, missiles, and anti-tank systems. Germany has made a similar investment deal, though the details remain under wraps.
Ukraine is also forging direct partnerships with European defense firms. Earlier this month, President Zelenskyy announced collaboration with Danish companies to build components for Ukrainian missiles and drones at a factory in Denmark—safely out of reach of Russian attacks. Britain has signaled similar intentions, and the trend toward joint ventures is gathering pace. Arsen Zhumadilov, head of Ukraine’s state procurement agency, explained the strategy: "When they enter the market they invest into the production and then they have their government pay for our ability to buy it and deliver it to the battlefield. This is the best."
Ukraine’s defense industry has become a crucible for innovation, driven by necessity and the brutal realities of modern warfare. The Associated Press reports that Ukrainian defense companies are pioneering the use of artificial intelligence and robotics to offset Russia’s numerical and technological advantages. One standout example is the R-34 quadcopter drone, developed by FRDM, which can evade Russian jamming, fly over 20 kilometers, and deliver guided explosives onto tanks and other high-value targets. Vadym Yunyk, FRDM’s founder, summed up the ethos: "Robots should die in the front lines, not people."
Drones have become a game-changer for Ukraine. Small first-person view (FPV) drones are responsible for nearly 70% of Russian losses in manpower and equipment within 15 kilometers of the front line, according to Ukrainian officials. At the opposite end of the spectrum, Ukraine’s deep strike drones can hit targets more than 1,000 kilometers inside Russian territory. FRDM’s latest quadcopter model can fly three times farther and carry more guided bombs than its predecessor. "We learned very quickly how to scale any production. If the government places an order to produce 10,000 drones a year instead of 3,000, I will be capable of doing this in a month and a half," Yunyk claimed.
Innovation is not limited to drones. Ukr Armo Tech, another Ukrainian defense firm, has developed the Gurza-1 armored personnel carrier, which features modifications to absorb drone strikes and better protect troops. CEO Hennadii Khirhii revealed that the company produced 500 vehicles last year and aims to triple capacity with the upcoming Gurza-2, a more agile vehicle that can carry additional personnel. Pavlo Verkhniatskyi, a defense industry expert in Kyiv, emphasized, "Even in the traditional subsector of armored vehicles, we are way ahead of some European companies." He explained that Ukrainian manufacturers have a unique edge: "We know the calibers the Russians are using to shoot vehicles, we know the special munitions they use to penetrate armor. All this knowledge is put into vehicles produced here."
Ukraine’s rapid adaptation and battlefield experience are making its defense industry increasingly attractive to foreign partners. According to Keith Kellogg, the Trump administration’s former special envoy for Ukraine, "The Ukrainians are the leaders in the world in terms of drone technology." European analyst Fabien Hinz echoed this sentiment, noting Ukraine’s "battle-tested systems, quite low production costs and entities in place capable of producing these systems rapidly."
As Ukraine looks to the future, its defense sector stands at a crossroads. The country is betting that innovation, international partnerships, and a new export strategy will not only help repel Russian aggression but also secure its place as a vital player in the global arms market. The stakes could hardly be higher—for Ukraine, for Europe, and for the future of warfare itself.
