Battles for Sudzha, U.S. aid resumption, and state of Ukraine's defense industry. Serhiy Zgurets column

U.S.-Ukraine talks outcome

I will start by saying that following the negotiations in Saudi Arabia, Kyiv expressed its readiness to accept the United States' proposal for the immediate implementation of a temporary thirty-day ceasefire regime on land, in the air, and at sea, provided, of course, that this plan is adopted and implemented by Russia.

However, this remains a possibility for now, as Russia's readiness or unwillingness to cease fire will become known soon. There were reports citing U.S. Secretary of State Marco Rubio, stating that the Americans will contact the Russians as early as Wednesday, March 12.

Frontline situation in Kursk region

For now, there are, of course, no details, but against the backdrop of this meeting in Saudi Arabia, Ukraine’s Armed Forces were actively engaging with Russian troops, as March 11 saw almost the highest number of combat engagements for January and February – as many as 259. This is a top situation for the start of the year. A third of these combat clashes occurred in Kursk, but by midday of March 12, Ukraine's General Staff reported only one attack in Kursk, which indeed contrasts with the activity of the previous day.

If we are talking about the combat actions on the Kursk front, the dynamics are certainly quite noticeable. And we know that there has been a withdrawal of Ukrainian troops from several positions, primarily in the north and east.

These appeared to be planned measures, as Ukrainian analysts stated that all the Russian advances into villages marked in orange zones on the map were in almost empty villages that Ukrainian troops had not always held, instead moving to other positions due to certain limitations related to Ukraine's supply and logistics.

There are settlements that were captured by the Russians right up to Sudzha, including Martynivka, which is a dominant height that can affect the more effective use of drones by the Russian Federation. But, of course, the question arises as to what is happening there now, at the current moment.

During a press conference in Saudi Arabia, President Volodymyr Zelenskyy stated that the Armed Forces are carrying out their tasks and that Russia is trying to put maximum pressure on Ukrainian troops. The command of the Ukrainian Armed Forces in Kursk is trying to preserve as many Ukrainian soldiers' lives as possible. However, he did not, of course, provide details on the current dynamics, and the biggest questions of the day are around Sudzha, because it is the district center that the Ukrainian Armed Forces have held, or are still holding, for 219 days; it is now already the seventh month and counting.

There are many videos from the past few days showing the Ukrainian military withdrawing from certain areas of Sudzha, where there are Russian soldiers in some parts of Sudzha displaying flags and also present in the central part of the district center. There were also reports from Russian propaganda outlets claiming that the Russians fully control the settlement of Sudzha, and of course, our messages from our sources stated that, indeed, the Russians had entered a certain part of the settlement. However, Ukrainian forces remain in the city, and fighting continues there.

If we refer to the DeepState OSINT resource, which published several maps throughout the past day related to the dynamics in Sudzha, according to these maps, there is a gray zone on the northern and western outskirts of the city, where fighting is ongoing between Ukrainian units and Russian forces.

So, in fact, there are areas in Sudzha where the gray zone exists and where Russian troops are not present. However, in any case, we understand that a significant part of maintaining Ukraine's foothold depends on controlling Sudzha itself.

We will see what the further dynamics will be in this area, because, so to speak, in addition to advancing in the north and east of the foothold, fighting in Sudzha itself, the Russians are now trying to push from both the west and the east, from the right and left flanks on the southern part of this foothold, towards the main roads that ensure logistics between Sudzha and Sumy. And pressure from Russian forces is occurring on both flanks of this section.

This is stated by Ukraine’s border service. There are also videos showing that the logistics of Ukrainian units are significantly complicated. However, in any case, it is definitely premature to say that Ukrainian forces have completely withdrawn from the Kursk region or completely left Sudzha, as we currently do not have full confirmation of such information.

In any case, even if Ukraine's foothold in the Kursk region shrinks, there are certain areas, particularly near Guevo, where it can be expected that defense will continue. The Ukrainian side will be interested in creating such security footholds to continue drawing the maximum number of forces to these areas and destroying the Russian army without allowing the Russians to advance into the Sumy region. I believe that, after some time, this will be the picture in this section of the front, where military and political objectives have been combined for an extended period.

Renewal of U.S. aid and Ukrainian defense industry complex

And, of course, we know that since the negotiations in Saudi Arabia, cooperation with the United States in the field of intelligence information has been restored. It was also announced that arms supplies for the Ukrainian Armed Forces have been resumed.

Against the backdrop of these events, particularly the cessation of receiving intelligence information and the halt in the supply of critically needed weapons, the issue of intensifying efforts related to the production of the necessary samples by the Ukrainian defense industry for the Ukrainian Armed Forces once again came to the forefront.

We know that just a couple of weeks ago, at a press conference, Ukraine's Prime Minister Denys Shmyhal spoke about a significant increase in the production of armored vehicles, artillery shells, and other items for the security and defense forces. However, expert opinion and communication with Ukrainian enterprises suggest that, in reality, the potential of the Ukrainian defense industry is not being utilized to its full capacity. There are certain limitations and problems that still need to be addressed more actively.

For several days, we actively discussed the suspension of U.S. military aid and the risks it creates for Ukrainian security and defense forces. In this context, the question arose about how well Ukraine’s defense industry is currently loaded with work and what the overall situation with the defense industry looks like. This was addressed by the General Director of the Ukrainian Federation of Employers in the Defense sector and former Deputy Minister of Economy, Ihor Fomenko.

"Indeed, the defense industry, which should be a priority, especially during a time of war, is not such at the moment. There are numerous issues that need to be resolved, starting with, first of all, early planning or contracting. We hear that there is already a vision of how contracts can be signed for three or more years. From a practical standpoint, this hasn't started yet. We hope it will begin soon," he said.

If the defense industry enterprises in Ukraine have at least a three-year contract, it will be possible to plan more responsibly in terms of staffing, financial policy, the development or scaling of production capabilities, logistics, procurement policies, everything related to ensuring serial production, and the appropriate level of quality.

"If we talk about access to financial resources, despite the fact that on November 5, 2004, Resolution 1288 was adopted regarding access for defense industry enterprises to preferential lending—100 million for three years at 5%, and 500 million for five years also at 5%. Unfortunately, the policy of the National Bank and some banks in Ukraine remains the same as in peacetime because risk management and the requirements for the sector are still the same as they were before. Although the defense industry requires additional funding, there is not enough financial resources. Out of about 1,000 enterprises currently operating to support the components of the security and defense forces, only about 10 have received these loans. So, everything related to access to preferential financial resources for enterprises fulfilling state orders and contracts also needs to be addressed. If we talk about the industry as a whole, according to 2024 statistics, our production capabilities are loaded at about 40%," said Ihor Fomenko.

He noted that the current discussion is about increasing the volume of purchases from national producers.

"Information has emerged that 4.5 million drones will be purchased, and the procurement of supplies and armored vehicles will be increased. Positive signals are indeed present. For example, the government has adopted a resolution allowing the use of intellectual property or developments owned by the state to scale up production and increase production volumes, which were previously handled by state enterprises, but now there is also the possibility of involving private enterprises. Because currently, out of 1,000 enterprises, about 120 are state-owned, and all the others are private enterprises engaged in fulfilling tasks to support the components of the security and defense forces. Therefore, loading existing production capacities, scaling up, and addressing bottlenecks where state enterprises cannot meet the needs is essential. There are indeed several areas: high-precision weapons and ammunition, so it is necessary to involve private manufacturers more actively," he said.

Ihor Fomenko noted that there are two options for loading production capacities.

"If we talk about loading production capacities, there are indeed two options: either additional financial resources, which, unfortunately, all that we collect in Ukraine as a state go to support the components of the security and defense forces, but this is not enough to meet all their needs. Therefore, this 40% figure indicates that either additional resources are needed to load other production capacities, which are essentially idle, or allow for the possibility of earning from exporting weapons that are not in demand due to their military-technical parameters or are already outdated. For example, drones from 2022 and drones from 2025 are completely different products. And allowing enterprises to earn foreign currency, invest in expanding production capacities, and develop new types of weapons. Because we know that in terms of drones, technical requirements change every four to six months, the situation at the front changes, and those drones that were used in 2022-23, and even some from 2024, are already not relevant on the front lines," he said.

The CEO of the Ukrainian Federation of Employers in the Defense sector also mentioned sanctions against private enterprises that manufacture weapons.

"If we again talk about Ukrainian defense industry enterprises, they are in a discriminatory situation compared to foreign suppliers of weapons. Even the same three types of penalties for a single offense, which are not present in contracts with foreign suppliers, exist for Ukrainian enterprises. For this, there needs to be political will to make the appropriate decision by the Verkhovna Rada. Unfortunately, yesterday, even a draft law, which was supposed to remove one of these types of penalties, was removed from the agenda. This refers to the interest charged for using funds that have been advanced to enterprises but are placed on a treasury account with a targeted purpose and cannot be used by the enterprise for anything other than what is defined in the state contract. For this, the Ukrainian enterprise has to pay interest—double the National Bank of Ukraine (NBU) rate, 31% annually, for something they cannot use. And we know the conditions under which our enterprises operate and supply security forces' warehouses—constant missile attacks, with many both state and private enterprises suffering. There are also not enough financial resources for recovery. While state enterprises sometimes receive financial assistance from the government, private enterprises do not, and they must restore their production capacities on their own," he noted.

Essentially, this seems like two realities. One reality, where the Prime Minister talks about increasing production volumes, prospects, and plans, and on the other side, several problems that are systemic, because we have consciously been discussing these issues before. And almost three months later, we are coming back to the same points, meaning nothing has changed. Then the question arises: where should the driving force for change be within government structures, the National Security and Defense Council, and the president, so that these difficult moments are not discussed on air but are already understood in the form of decisions made by the structures responsible for the defense sector? Ihor Fomenko believes that political will is needed for this.

"First of all, it is political will. Implementing changes is, indeed, the responsibility of the President's Office today. There are two tools that can practically realize all these changes: either the Verkhovna Rada of Ukraine, in terms of legislative changes, or the Cabinet of Ministers of Ukraine, in terms of changes to the relevant resolutions or decrees of the Cabinet of Ministers of Ukraine. Proposals on what needs to be changed in the legislative field, even draft laws and government resolutions from the Federation of Employers of Ukraine, have been sent by other public organizations to the relevant structures. Some of them have been adopted, but unfortunately, there is no systemic approach to the industry today. And this is the main task: to recognize the industry as a priority. Because when compared to other sectors, it is the last in terms of state support and the functioning of industry enterprises. Banks are unwilling to work with enterprises that produce weapons; there are restrictions, and some banks even refuse to open accounts. I’m not even talking about access to credit resources or preferential credit resources. Usually, when evaluating collateral, a piece of equipment used for manufacturing weapons, for example, is valued 1 to 10. If a machine or equipment costs 100 million, it will be assessed at 10 million, as scrap metal and so on," explained Ihor Fomenko.

That is, a comprehensive approach is needed, which must be brought to the High Command, decisions should be made, the industry should be prioritized, and then cascaded to the relevant executors who need to implement changes. Industry enterprises, relevant associations, and unions have developments and are ready to get involved.

"Unfortunately, we are not always heard, and sometimes we are perceived as, conditionally, opposition. It’s quite a strange situation because our task now is victory, to ensure the independence and sovereignty of the state. Everyone should be focused on this goal. Therefore, we are ready to contribute, we have proposals, which have been officially sent to the Verkhovna Rada and the Cabinet of Ministers of Ukraine. We need to take action and work together. Without this, the constant swings—sometimes help is given, sometimes it’s not—will continue. We must rely only on ourselves, on our own defense industry, on our own Armed Forces. That’s it. Everything else is a bonus. Therefore, first and foremost, we need political will," the expert is convinced.

"For Ukraine, nothing is impossible"

Ihor Fomenko also explained whether Ukraine can set up production of, for example, TNT, which is necessary for the ammunition and mine manufacturing. How complex a technological decision this is, and whether it can be solved in the country within a reasonable timeframe.

"For Ukraine, nothing is impossible. Everything can be done. We have several defense industry development programs, such as missile and anti-missile programs. We once had a state target program for special chemicals, development of powders, and relevant explosives. Unfortunately, it ended in the second year, but if there is political will and a designated source of funding, nothing is impossible. I know there are private companies actively working to provide the needs of manufacturers who produce ammunition, or bombs, or other explosives. They need support. Unfortunately, this is also an element of the system and a systemic approach. Because everything is interconnected. And a conditional bomber drone without what it will drop is useless. Therefore, we need to consider it comprehensively, and for this, there must be adequate financial resources. Currently, the General Staff, the Armed Forces, and the Ministry of Defense determine priorities, redistribute the available funds, but it is not enough. According to the Danish model, this year, we plan to attract about 1.5 billion euros for the repurchase of Ukrainian military weapons. But again, if we calculate, it will be less than 40% of the available production capacity. If we talk about new directions, they need to be prioritized, and in this way, financed and maximally supported to ensure these tasks are completed," says Ihor Fomenko.

To achieve this, it is necessary to create rules of the game that will not change every three months and will be clear to those involved in the process.

"Do not change priorities, where today we have one priority, and in three months, the money is shifted to another priority, forgetting about the previous one. There must be a consistent position, at least for several years, with an understanding of what we will be fighting with in three or five years. We understand that Russia's attempts to destroy sovereignty, the state, and the nation will not end here. Therefore, we still need to plan. In the past, there were development programs, as you know, for weapons and military equipment, developed by the state-targeted program for the development of the defense industry, and there were corresponding financial resources. Unfortunately, not all of these programs were completed. Today, there is not even a program for the development of weapons and military equipment," noted Ihor Fomenko, the General Director of the All-Ukrainian Federation of Employers' Defense and Deputy Minister of Economy of Ukraine from 2022 to 2024.