PERMANENT ARMS ECONOMY

More US and European defense companies are setting up operations in Ukraine as the war rages on

Sinéad Baker
Thu, October 3, 2024

Western defense companies are increasingly setting up operations on Ukrainian soil.


Two companies announced this week that they are starting new projects based in Ukraine.


They add to a growing Western defense presence in the country.

US and European defense companies are increasingly setting up operations in Ukraine, with the brutal war raging on and presenting plenty of opportunities.

Two companies said this week that they will work more on key weapons in Ukraine, adding to what has been a growing presence of Western defense manufacturers in the country since Russia launched its full-scale invasion in February 2022.

KNDS, a French-German defense group, announced on Tuesday that it had opened a subsidiary in Kyiv, Ukraine's capital, where one of its aims is to "carry out maintenance, repair and overhaul work" on some of its systems that Ukraine's military is using.

This includes the Leopard 1 and 2 main battle tanks, the CAESAR artillery gun, the AMX10 RC armored fighting vehicle, the PzH 2000 armored howitzer, and the Gepard self-propelled antiaircraft gun.

The company said in a press statement that the new subsidiary "will support the cooperation between Ukrainian government institutions, the Ukrainian armaments industry and KNDS."

Meanwhile, AeroVironment, an American defense contractor headquartered in Virginia, signed an agreement with an undisclosed Ukrainian company to make the Switchblade 600, a loitering munition, in Ukraine, the Kyiv Independent reported.

The moves build on a growing Western defense industry presence in Ukraine.

Ukraine's defense minister, Rustem Umerov, said in December that his country had signed "dozens of new contracts" that included joint production agreements with Western partners.

German arms maker Rheinmetall has opened a plant in Ukraine and its CEO said in May that the company will open a new air defense facility in the country.

It also said that it would produce Lynx armored vehicles in Ukraine.

BAE, a major British defense firm, meanwhile, announced last year that it was opening a new base in Ukraine to "ramp up" its support for the country's armed forces.

And an unnamed US State Department official told Defense One that more American defense companies seem interested in establishing themselves in Ukraine.

But the official also warned of the dangers involved, saying no company wants their facilities targeted or employees hurt.

The efforts are part of a wider push to integrate Western and Ukrainian defense efforts, including by sharing technologies, Ukrainian weapons specialists working in the West, and Western countries repairing and storing Ukrainian weaponry.

These efforts will "allow Ukraine to become self-sufficient over time and integrate Ukraine into the broader Western security network," Washington DC-based think tank the Institute for the Study of War said in January.

Most of Ukraine's weaponry comes from its allies, but it has also dramatically increased its own production. This includes making its own howitzers, glide bombs, and drones.

Russia is also ramping up its own production, sparking concerns in the West.

Russia's invasion of Ukraine has been a major boost for Western defense companies, with many nations increasing their defense spending.

Countries have increased their orders, and many companies have increased their production, including equipment that had stopped being made — not only to aid Ukraine but to prepare for any future Russian conflict with the West.

The benefit has been huge for US companies: Of the $113 billion pledged by Congress up until April 2024 in relation to the war, as much as $68 billion was destined to be invested in domestic companies, according to the Center for Strategic and International Studies think tank.


Ukraine ramps up arms production, can produce 4 million drones a year, Zelenskiy says

Olena Harmash
Wed, October 2, 2024 

FILE PHOTO: Ukrainian service members attend military drills near a frontline in Donetsk region


By Olena Harmash

KYIV (Reuters) - Ukraine can produce four million drones annually and is quickly ramping up its production of other weapons, President Volodymyr Zelenskiy said in comments authorised for publication on Wednesday.

Speaking on Tuesday to executives from dozens of foreign arms manufacturers in Kyiv, Zelenskiy said Ukraine had already contracted to produce 1.5 million drones this year.


Drone production was virtually non-existent in Ukraine before Russia's invasion in February 2022.

"In extremely difficult conditions of the full-scale war under constant Russian strikes, Ukrainians were able to build a virtually new defence industry," said Zelenskiy.

Ukraine tripled its overall domestic weapons production in 2023 and then doubled that volume again in just the first eight months of this year, Prime Minister Denys Shmyhal told the same gathering. Ukrainian officials gave no absolute figures.

More than 31 months into its war with invading Russian forces, and with no end in sight, Ukraine now spends roughly half of its state budget - or about $40 billion - on defence.

Ukraine also receives large amounts of military as well as financial support from its Western allies.

Russia, which is much larger and richer than its southern neighbour, is expected to hike its own military spending by 25% next year from its 2024 level, to about $145 billion.

INCREASE IN DOMESTIC PRODUCTION

Ukrainian officials say they expect foreign funding to steadily diminish while its defence needs continue to balloon. Kyiv is increasingly focused on producing as much as possible domestically.

Shmyhal said the government plans to increase spending to help bolster growth in domestic weapon production in 2025.

"Next year's budget envisages a 65% increase in funds for weapon purchases. This is an increase of almost $7 billion," Shmyhal told the forum.

He said Ukraine's strategic task was to increase its domestic long-range capabilities and create conditions to have a technological advantage over Russian forces.

Moscow forces have been steadily advancing in Ukraine's eastern Donetsk region and on Wednesday claimed complete control of the small mining town of Vuhledar.

The ability to strike deep inside Russia is a priority for Ukraine. Zelenskiy has been seeking permission to use Western long-range missiles for strikes inside Russia, so far without any agreement.

"Among our strategic tasks is to strengthen the long-range capability of Ukrainian weapons, so that there is no safe place in the European part of Russia where the "debris" of our drones and missiles could not reach," Shmyhal said.

During Tuesday's event, several agreements were signed between Ukrainian and foreign companies to produce ammunition, different types of drones and also to repair Western equipment in Ukraine.

Franco-German defence group KNDS, which produces heavily armoured wheeled and tracked vehicles, announced it had opened a subsidiary in Kyiv.

(Reporting by Olena Harmash; Editing by Gareth Jones)