Ukrainian President Volodymyr Zelenskyy’s Friday announcement of controlled weapons exports underscores a critical problem. Ukraine’s defense industry can supply its forces and desperate Western allies. However, bureaucratic barriers block access to €150 billion in potential partnerships.
“EU member states are actively discussing with Ukraine how to organize co-production and technology transfer,” warns Martin Jõesaar from the EU Defense Innovation Office in Kyiv.
“We need clarity, especially as SAFE loans approach—€150 billion, that’s huge money. We want to use it together with Ukrainians. But if there are no clear rules, the window of opportunity will close soon.”
Zelenskyy’s pledge to present three export platforms within two weeks signals Ukraine recognizes the urgency.
Yet a new Economic Security Council analysis reveals the deeper structural problems that have created this €150-billion bottleneck.
The capacity-bureaucracy mismatch
Ukrainian defense companies face an absurd situation: they can build more weapons than their government can afford, but export rules won’t let them sell surplus to NATO allies scrambling for exactly these battle-tested systems.
The Economic Security Council found Ukrainian companies operating at a 55% capacity while European defense ministers publicly seek production partnerships.
Some manufacturers are already scouting relocation sites in Poland and Romania—precisely what Ukraine’s security policy should prevent.
Zelenskyy acknowledged the surplus on Friday: “Certain types of weapons—and this is modern weapons—we can produce in much larger volumes than we can finance ourselves, while certain types of weapons are already in significantly larger volumes than we actually need in Ukraine today.”
Six friction points blocking partnerships
The Council’s analysis identifies six friction points where security concerns clash with industry needs. The common thread: uncertainty.
Companies need permits to negotiate contracts, not only to sign them. Trade shows require months of approvals. Outdated dual-use lists don’t cover modern drone components. Paper-based licensing creates unpredictable delays that frustrate Western partners seeking reliable suppliers.
Meanwhile, imports get streamlined procedures. Ukrainian forces receive Western weapons in weeks, but Ukrainian companies can’t ship products abroad in months.
What Western partners actually want
European governments have now listed specific requirements before committing massive funds. These are:
- Transparent “single window” licensing system
- Risk-based controls with end-user verification
- EU-compatible regulations for program access
- Electronic processing instead of paper bureaucracy
Yet the institutional gaps still run deep. Ukraine is developing two initiatives that could help, but both need implementation.
Defense City, a proposed legal regime, would give defense companies tax exemptions and simplified exports in exchange for reinvesting all profits. The program “Build with Ukraine” involves producing Ukrainian weapons in partner countries like Denmark and Germany using Ukrainian technology.
As Oleksandra Azarkhina from the Economic Security Council notes, implementing these programs while updating the defense strategy remains essential for accessing European funding.
The strategic export dilemma
The Council identifies the core tension: Ukraine must balance the risk of critical assets leaving the country against isolating its defense industry. Companies can’t scale up without export revenue and generate more tax revenue for state purchases.
Government officials defend current restrictions as essential for national security. Over-liberalizing exports risks technology leakage to hostile actors.
Defense manufacturers counter that over-restricting exports triggers industrial outflow. This weakens national security more than selective, monitored exports to proven NATO allies.
Time pressure builds
European defense spending will probably peak in 2025-2027. After that, political priorities may very well shift.
Ukraine has perhaps 18 months to position itself as Europe’s defense partner rather than just an aid recipient.
Last week’s Defense Tech Valley summit in Lviv attracted $100 million in investment from 50+ countries, showing international appetite. But investors need regulatory predictability.
The Council recommends unified legislation, electronic licensing, risk-based controls, and EU-standard procedures—changes essential for accessing European defense funding programs.
The €150-billion question
Zelenskyy’s export announcement suggests Ukraine recognizes the stakes. The President’s emphasis on working only with countries “who have really supported us, our independence” signals a more strategic partnership approach.
Yet, announcing export platforms is easier than implementing the systematic reforms Western partners demand. The Economic Security Council concludes Ukraine needs a codified, risk-tiered wartime regime. This would reconcile competing priorities.
The window for capturing Europe’s defense investment boom won’t stay open indefinitely. Whether Ukraine can streamline its bureaucracy before Western patience runs out remains the €150-billion question.