Ukraine’s integration into European defense industry: what lies ahead

Contents

1. Factors driving Ukraine and Europe closer in the defense-industrial complex
2. What Ukraine can offer Europe. Cruise and ballistic missiles
3. What Ukraine can offer Europe. Ukrainian drones
4. Joint projects already active in alliance with Europe
5. What Ukraine must do for integration into the European defense-industrial complex
6. Export of Ukrainian defense technologies and armaments
7. What Ukraine and Europe must do together

This material is prepared in cooperation with the Consortium for Defense Information (CDI). This collaborative project of Ukrainian analytical and research organizations is aimed at enhancing information support and analytical services in national security, defense, and geopolitics.

Factors driving Ukraine and Europe closer in the defense-industrial complex

March 2025 marked the beginning of a new phase for Ukraine and Europe. After a series of steps by the U.S. distancing itself from NATO allies, the creation of continental military capabilities without the United States has become a concrete task for European countries. For Ukraine, this has created new opportunities for full integration into the European defense and defense-industrial space. It has become clear to key capitals in European NATO that an effective construction of this space is impossible without Ukraine. It is impossible because Ukraine has already surpassed European partners in many areas, with new innovative solutions in the defense industry emerging in Ukraine. Some of these solutions are systematically of interest to European partners and could significantly strengthen the philosophy of military-technical cooperation.

What Ukraine can offer Europe. Cruise and ballistic missiles

In March 2025, information emerged about the successful use of Ukraine-produced cruise missiles, including a modified version of the R-360 MC anti-ship missile, now known as "Long Neptune." This missile is reported to have a range of up to 1,000 km and a 150 kg warhead. If confirmed, this development presents a real opportunity to scale up production, both for the needs of the Ukrainian Armed Forces and for European countries. In 2024, Romania was frequently mentioned as a potential partner for joint production. In the case of the "Long Neptune," the "Danish model" also appears to be a viable option — European financing to support the creation of Ukraine’s "long missile arm."

Considering that Ukraine needs at least a few thousand missiles, both cruise and ballistic, to effectively strike Russian military targets, developing both domestic and joint foreign production is crucial. Moreover, such missile achievements allow Ukrainian politicians to raise the issue of involving industrial groups not only in joint production but also in joint missile technology development.

It is worth noting that MBDA recently announced plans to double its missile production in 2025. For Ukraine, this is a clear signal to develop missile cooperation in European or joint sectors. Kyiv already has some experience with negotiations and positive decisions on missile issues, notably with MBDA Italy and Leonardo, so work may move from joint production to the organization of development.

What Ukraine can offer Europe. Ukrainian drones

While missile development may seem like a prospect for the future, Ukraine successfully tested its long-range drone with a range of up to 3,000 km in March 2025. Again, this presents an opportunity for scaling using the "Danish model" or the creation of joint production.

In general, domestic companies are increasingly confident in localizing the production of various types of drones. In March 2025, the company Vyriy Drone delivered its first batch of fully localized FPV drones made entirely from Ukrainian components.

Overall, the pace at which Ukraine is ramping up drone production is impressive. In 2024, 1.8 million drones were produced, and by the first quarter of 2025, nearly 500,000 drones had been manufactured. Deregulation, preferential credit at 5% annual interest in UAH, and annual contracts within the state order have helped. Companies have begun to plan their work, and some already employ 500-700 people.

Joint projects already active in alliance with Europe 

The first results in developing military-technical cooperation in the direction of joint development, especially with the involvement of Ukraine's private defense sector, began to emerge in late 2024 – early 2025. For example, Ukrainian Armored Vehicles company received licenses from the European defense holding Czechoslovak Group to produce tank and artillery shells. Swedish Saab selected the Ukrainian private company Radionix as a partner for joint development. And this is just the beginning.

Progress is even more noticeable with state companies. The French defense company Thales, in cooperation with UkrOboronProm, is creating a joint venture in Ukraine. The Estonian defense company Frankenburg Technologies has announced it will begin producing missile systems in Ukraine. Finnish company Insta Group Oy, together with Ukrainian specialists, has developed and presented the new Steel Eagle ER strike drone for the Ukrainian Armed Forces.

Lithuania, in partnership with Ukraine, is building a new generation explosives plant.

UkrOboronProm and Danish Weibel Scientific are developing and producing radar systems.

Earlier, the Franco-German consortium KNDS envisioned the participation of Ukrainian developers in the creation of the tank of the future (Main Ground Combat System).

What Ukraine must do for integration into the European defense-industrial complex

 Important steps for further development include enhancing the capabilities of Ukrainian companies to produce components for various types of drones, to move from assembling drones from foreign components, mainly from China, and to eliminate dependency, particularly from China. To become influential international players in this segment, full liberalization and the ability to produce and localize components in Ukraine are necessary. Without this, entering international markets will not happen – drones with Chinese components will have little interest for NATO countries. At the same time, the development of the component base is impossible without further deregulation of the entire system.

There are challenges with finding partners and with Ukrainian companies entering the European market. Private high-tech Ukrainian companies are forced to independently seek partners in European defense companies and propose cooperation projects, as state authorities tend to offer only state-owned enterprises as partners. An example of this is the New Energy Ukraine Alliance (developers and manufacturers of drones, EW), which managed to independently negotiate with the German company Diehl Defense to supply IRIS-T missile defense systems and new self-propelled howitzers RCH 155 with modern EW systems, an area where Ukraine's defense industry far surpasses European achievements. But this is a case where the result was achieved rather "in spite of" than "because of."

Such approaches complicate obtaining financial support for weapons production by Ukrainian private defense companies, as financial resources are allocated in response to official requests from the respective Ukrainian authorities. This also hinders or significantly slows down the ability of the Ukrainian defense industry to acquire some unique components for weapons. For example, the aforementioned New Energy Ukraine Alliance notes that it has not yet managed to obtain a key element for the modern underwater drone it is developing, as the necessary inertial system is of Western production and costs almost as much as the entire underwater device.

Considering these issues, defense industry experts and the Ukrainian Defense Forces are promoting the idea of creating experimental combat units within the Ukrainian Defense Forces. These units would be responsible for operational testing of new defense systems created by Western defense companies and in collaboration with Ukrainian partners.

The idea deserves special attention because the exceptional trump card of the newest Ukrainian defense-industrial structures is their immediate proximity to the line of contact, and sometimes their presence on the battlefield. This provides instant feedback on the level of effectiveness of new types of weapons. Moreover, often defense-industrial structures are created from army veterans, former experienced soldiers who are simultaneously engineers and designers. Representatives, and even more so, heads of high-tech Western companies, do not have the opportunity to obtain data on practical testing of weapons in war, or receive information months later, which significantly slows down the implementation of modern innovative solutions. That is, the opportunity to test modern Western weapons and take a direct part in their improvement provide unique chances for Ukraine's cooperation with Western companies.

Additionally, a unit should be established within Ukraine's Ministry of Defense or the General Staff to facilitate the operational exchange of data regarding the emergence of new technological solutions and competencies for developing weapons and equipment. This unit should also manage requests for the receipt or purchase of specific technologies from Western defense companies. It would be beneficial to assign this unit the responsibility of coordinating with private defense companies within the country as well.

It is worth dwelling separately on such an important aspect as the opening of arms exports by Ukraine.

Export of Ukrainian defense technologies and armaments

Some areas of arms exports remained "open" during the full-scale war. For example, Ukraine continued supplying spare parts for Indian An-32 aircraft, which were manufactured in Ukraine. Despite India’s decision to purchase Western military transporters, it remains interested in restoring its fleet of An-32s, which are indeed unique. At the same time, Ukraine has a need for munitions, which India has been producing for some time. Similarly, Turkey has sourced aviation engines for its drones from the Ukrainian company "Ivchenko-Progress."

Of course, export can only be considered when specific weapons, dual-use services, or products are not being purchased by domestic customers. However, for the dynamic development of the military technologies sector, maximum flexibility is crucial, as even during large-scale combat operations, manufacturers are not operating at full capacity. For example, in February 2025, it was reported that more than half of the capacities of companies in the "Technological Forces" sector were idle. Specifically, leading Ukrainian manufacturers within "Technological Forces" were unable to utilize 63% of their production capacities for state needs. Experts emphasize that this is a common situation. After the active phase of the war, many defense industry enterprises will face the risk of closure.

The export of defense and military technologies can strengthen the Ukrainian Armed Forces with advanced weaponry, facilitate "option exchanges" with countries like Turkey or India. Ukraine can export weapons, dual-use products, and services worth $3-4 billion annually. This would ensure a flow of new technologies and generally technological superiority over enemy Russia.

What Ukraine and Europe must do together

The synergy of Ukraine’s defense industry with Western defense companies lies in combining efforts in joint development (R&D) and improving weapons, where Ukraine’s contribution would be rapid testing and identifying improvement directions, while the Western specialists contribute by providing existing high-tech solutions and resources. The ability to jointly finalize modern weapons can provide technological superiority over the enemy.

To achieve this, both sides – Ukraine and European countries – must create a new cooperation mechanism, allowing an operational shift from the traditional "state-to-state" model to an alternative approach with maximum involvement of the private sector. Often, the choice of private partners was made only when the state sector could not provide corresponding solutions. For example, the production of the Bohdana self-propelled howitzer. Private companies are also more flexible and dynamic. As an illustration, one of the leaders in the private sector, Ukrainian Armored Vehicles, increased its revenue by 100 times in 2023, from 103 million UAH to 13 billion UAH.

At the same time, it is quite realistic for Ukraine to appeal to the security agreements already concluded with NATO countries, including the U.S. These agreements are both a lifeline and a powerful enhancer of Ukraine’s negotiation position in the current situation. Security agreements with Ukraine allow governments of countries that recognize Ukraine’s role in ensuring Europe's security and defending democratic values worldwide to continue and increase their support in various forms. Moreover, these agreements allow for the initiation of joint weapon development and production, technology exchanges, licensing, and intelligence sharing.

Thus, security agreements have become a key component of Ukraine’s security guarantees through the development of its defense capabilities and directly the Defense Forces, in the context of the joint development of European defense capabilities. Undoubtedly, the UK, France, and the U.S. should lead this work as guarantors of the Budapest Memorandum. The U.S. could provide Ukraine with guarantees against nuclear weapons, as well as the necessary missile systems and missile technologies for developing its own missiles.

Therefore, despite all the political realities, Ukraine should appeal to the security agreements with NATO countries, including the U.S. These security agreements can serve as a lifeline and a powerful enhancer of Ukraine’s negotiating position in the current situation.