Proposed deal raises questions about exports, markets, and the future of Ukraine’s defense industry.
Ukrainian President Volodymyr Zelenskyy recently hinted at a „mega deal” to swap the latest Ukrainian drones for American air defense and ammunition.
A „Mega Deal” in the Works?
„The people of America need this technology,” Zelenskyy told the New York Post on July 17. „We will be ready to share this experience with America and other European partners.”
Ukraine’s Domestic Drone Industry Faces Export Restrictions
The news comes as Ukraine’s domestic drone industry is grappling with Kyiv’s reluctance to allow technology exports, despite NATO militaries’ interest in the country’s defense breakthroughs. Since the full-scale invasion in February 2022, an unofficial government block has prevented military and dual-use hardware exports.
The Schrödinger’s Export
Ihor Fedirko, head of the Council of Defense Industry, described the situation as „Schrodinger’s export,” with no legislation closing it, but „de facto it’s just not happening.” Yaroslav Azhnyuk, CEO of Odd Systems and the Fourth Law, lamented that the export control office has never granted a single permission without top-level approval.
Hope for a Thaw?
If a major deal with the US were to materialize, industry players hope it would end the de facto export ban. Zelenskyy’s proposed deal raises questions about how a sudden opening of exports would work, which markets Ukraine should target, and which companies would participate.
The American Gambit: $10-$30 Billion in Drones?
Zelenskyy told reporters on July 24 that the „mega deal” entails trying to sell $10 to $30 billion in drones to the US, but didn’t specify whether this would be in exchange for funding or weapons. Ukrainian industry players hope to establish production in the US, teaming Ukrainian firms with US companies to build on Ukrainian IP.
The European Model: Coproduction Agreements
The EU has been quick to sign agreements to fund Ukrainian production inside Ukraine. Denmark, the UK, and Germany have all provided funding for Ukrainian weapons development. These agreements could entail teaming Ukrainian firms with European companies who would build on Ukrainian IP.
Potential Issues
Moving production to the US risks losing Ukraine’s competitive advantages of low regulation and labor costs. Also coproduction deals are, local arms makers remind, not a full cessation of export controls.
Conflict at Home: Corruption Concerns
Changing export policies also raises questions about who will be able to export. Ukraine’s internal weapons procurement processes have been largely opaque, leading to accusations of kickbacks and corruption. Amid a consolidation of power within the Zelenskyy administration, activists warn that new coproduction or international trading details could replicate the vulnerability and opacity of domestic defense purchases internationally.
