Ukrainian industry at war

In this interview, Ihor Fedirko, CEO of the Ukrainian Council of Defence Industry, explains how deregulation, accelerated procurement, and rapid innovation have reshaped the sector — and what structural changes are still needed to sustain growth, ensure interoperability with NATO, and balance urgent frontline demands with long-term industrial stability.

Dr Aleksander Olech: Over the past two years, private companies have become the dominant force in Ukraine’s defence production. Which deregulation measures were decisive for this breakthrough, and which remaining barriers must be removed to maintain the current pace of growth?

(Ihor Ferdiko, CEO Ukrainian Council of Defence Industry): Over the past two years, the key shift was that Ukraine made defence production workable for private companies at wartime speed. Before the full-scale invasion, the system was far more state-centred and private manufacturers often had no clear, practical route into supply. One major unlock was a set of wartime experimental government measures that lowered entry barriers for private producers by simplifying admission pathways and speeding up permits and licensing across different production categories. In parallel, procurement moved away from slow, rigid cycles to faster wartime procedures, which let companies plan production runs, secure components earlier, and grow output instead of losing months to paperwork.

A second decisive step was fixing the last mile between a working product and a legal pathway into procurement. Codification was simplified, the document package was reduced, and the Ministry of Defence publicly set a target to shorten codification timelines to around ten days in some categories under a simplified wartime procedure. For fast-moving areas like drones and electronic warfare, this speed is critical: if admission drags on, the Armed Forces cannot scale solutions that already work.

Procurement also became easier to navigate. The Defence Procurement Agency helped systematise how requirements turn into contracts and deliveries, so the market could work with clearer rules and faster execution. Quality assurance began to modernise as well, moving away from purely manual acceptance toward a model closer to NATO practice, with clearer manufacturer responsibility against defined requirements. Access to finance improved through targeted state support tools, including cheaper credit instruments around 5 percent, and workforce stability became more manageable through the wartime reservation framework that helps critical enterprises retain key engineers and production staff.

To keep today’s growth rate, the remaining barriers are mostly about predictability and bottlenecks. Industry needs clearer medium-term demand planning and contracting discipline so companies can invest in lines, tooling, quality systems, service and repair capacity, and supply chains without living month to month. Testing and certification capacity must expand, otherwise delays simply move from paperwork to queues. Components are another weak point: Ukraine needs stronger domestic component production and a smarter approach to import duties by component category, so manufacturers are not penalised for critical inputs while localisation is being built. Intellectual property rules also need to be clearer and more investable for co-development and licensing with international partners. Finally, procurement should allow the Armed Forces to buy software as a standalone capability, not only inside hardware-software bundles, so software can be funded, contracted, updated, and sustained at scale.

NATO and the EU increasingly require interoperability and standardised weapon systems. How does Ukraine plan to adapt to Alliance standards while retaining its competitive edge in rapid innovation?

Ukraine is aligning with NATO and EU requirements without losing the speed that matters in wartime. In practice, we are building two tracks in parallel. One stays fast for urgent battlefield needs: rapid iteration, quick fixes, short feedback loops. The other is the industrial track for systems that must be interoperable and scalable: stable configurations, proper documentation, quality processes, traceability, cybersecurity hygiene, and lifecycle support.

Interoperability has to be designed in early where it matters most: command and control, communications, sensors, counter-UAS, data exchange, and sustainment. If interfaces and baselines are defined upfront, teams can keep improving performance quickly while staying compatible with partner requirements. That is how a battlefield solution becomes a product that can be fielded, maintained, and upgraded across a wider coalition.

We also see institutional bridges that push this forward. NATO and Ukraine launched UNITE – Brave NATO, with NCIA executing the first joint initiative on a defined timeline. On the EU side, the EU–Ukraine Defence Industry Forum and the EU–Ukraine Task Force on Defence Industrial Cooperation are meant to move cooperation from ad hoc projects to structured industrial integration, including through instruments such as SAFE.

So the approach is to keep the wartime innovation loop, and add the industrial layer allies expect, so standards become a pathway to scale and cooperation rather than a brake on adaptation.

Given the limitations of state procurement budgets and the growing industrial capacity, should the private sector begin establishing a permanent export presence now, or should full saturation of the Ukrainian Armed Forces remain the priority?

The priority must remain full saturation of the Ukrainian Armed Forces. Any export model that competes with frontline supply is a strategic mistake. If exports are permitted, they must be controlled: strict licensing, verified surplus categories, and a rule that domestic need always comes first.

At the same time, controlled exports can strengthen the domestic effort because they keep the industrial base stable. Publicly, Ukraine’s defence-industrial capacity for 2025 is estimated at around $35 billion per year, while the state budget earmarks roughly $17.5 billion for procurement, with effective purchasing capacity closer to about $13 billion. That does not load the full industrial base, and a significant share of capacity remains undercontracted.

That underloading is why private manufacturers argue for a controlled export track. If factories do not have predictable load, they lose teams, suppliers, tooling, and the ability to improve quality and reliability. Controlled exports help keep lines running, reduce unit costs through serial production, maintain cashflow, and finance investment in production capacity, R&D, and quality assurance. They can also be structured to add value without harming frontline supply through service packages, training, maintenance, and export-ready configurations, with licenses that can be paused whenever the military needs it.

Export readiness should be built now because compliance, end-user controls, licensing procedures, and partner procurement relationships take time. Meaningful export contracting is expected later, and we do not expect the first real contracts before the second half of 2026.

In a recent interview I said that in 2026 Ukrainian arms exports could bring up to €1.5 billion and annual production pace could grow by almost 70 percent. These figures are not an argument to export instead of supplying the front. They support a regulated mechanism that turns surplus capacity into stability and, ultimately, more deliveries for Ukraine’s Defence Forces.

Ukraine has become a global laboratory for drone warfare and battlefield robotics. In which area do you currently see the greatest breakthrough potential — autonomy, sensors, AI-driven targeting, battlefield logistics, or integration with command-and-control systems?

The biggest breakthrough potential right now is system-level integration with command and control, combined with higher-level autonomy. Individual drones improve constantly, but the step-change comes when sensors, operators, strike assets, and logistics work as one workflow that still functions under heavy electronic warfare and at scale. That is what shortens the cycle from detection to action and reduces operator load.

Ukraine is already moving in this direction through digital command platforms such as DELTA and a broader push to network sensors and unmanned assets. The point is a connected system where different platforms can be tasked, tracked, and supported within one operational picture.

Autonomy, sensors, and AI-enabled features matter most when they plug into that wider architecture, especially in jammed environments where resilience and decision support become critical. Ground robotics is also moving fast because it directly saves lives in high-risk zones. Ukraine has been codifying and approving domestically produced ground robotic systems for operational use, and the military is building more dedicated structures for robotic ground vehicles in combat support, logistics, evacuation, and mine-related missions. The next leap is making these systems reliable at scale and fully integrated into the same command picture, not treated as isolated gadgets.

Defence industries require predictable orders, while wartime realities force short decision cycles. How is the sector addressing the instability of short-term contracts, which undermine production planning, investment, and workforce retention?

Wartime will always force short decision cycles, but Ukraine is trying to reduce volatility for manufacturers through a mix of longer commitments, de-risking tools, and diversified contracting channels.

One element is multi-year contracting. Under the Weapons of Victory framework, the Ministry of Defence reported that in 2025 it signed contracts with 12 Ukrainian manufacturers worth almost UAH 130 billion. State-guarantee tools also support longer cycles: the Ministry of Defence stated that in 2024 it concluded 11 three-year contracts with eight domestic enterprises under a state-guarantee programme, with total guarantees exceeding UAH 24 billion. These mechanisms make it easier to finance production, invest in tooling, and keep teams in place.

Another element is procurement design that keeps frontline flexibility while giving industry more structure. The Defence Procurement Agency has been introducing a model that combines direct contracts for unique systems, approaches similar to framework agreements for comparable specifications, and faster catalogue-style procurement through DOT-Chain Defence. DOT-Chain’s rating and feedback layer helps link field performance to repeat purchases and engineering upgrades.

A third reality is that demand in Ukraine does not come only from the central state budget. Procurement can also run through oblast and local councils and communities, by individual military units using direct procurement budgets, and through charitable organisations and reserve or emergency channels. For manufacturers, this spreads demand across several pipelines and reduces the stop-start pattern when one channel slows down, even if it increases the need for coordination and standardisation.

Finally, partner-financed procurement models, where allies fund contracts directly with Ukrainian manufacturers for delivery to the Armed Forces, can keep production lines loaded and smooth volatility.

Access to combat data — including operational failures — is an important competitive advantage. Does the current system of sharing frontline experience with manufacturers operate quickly enough, or are structural changes necessary to accelerate feedback loops?

Ukraine is much faster than it used to be, and in several segments the feedback loop is already very direct, but it is not equally fast across the whole market. The strongest manufacturers in each category often have dedicated frontline teams that work closely with frontline units and collect real performance data. This gives many producers direct access to combat and technical lessons, and lets them adjust quickly when conditions change.

That speed matters because the battlefield is not uniform. What works in one region may fail in another because the EW environment, terrain, tactics, and unit-level practices differ. As a result, manufacturers adapt not only to the general threat, but often to the way specific units operate, so the product is effective and intuitive for the people using it.

The remaining bottleneck is usually not a lack of data. It is fragmentation and the lack of a shared standard for reporting failures in a way engineers can act on immediately. A short note like it fails under EW can mean many different technical issues. Without common templates, secure channels, and clear ownership for triage, lessons can stay local and reach manufacturers too late.

This is where structural improvements help: a unified, secure field-to-factory pipeline where issues are captured in a standard format, prioritised quickly, and translated into clear engineering tasks. Manufacturers should receive sanitised, usable packages with conditions, symptoms, repeatability, and whatever logs or telemetry can be shared. Existing manufacturer-facing infrastructure can help scale this, but the core is standardisation and speed. As systems become more networked, feedback must also cover integration layers such as communications and command and control, not only a single drone model.

Russia pursues a narrow, standardised portfolio of UAV platforms, whereas Ukrainian private manufacturers produce dozens of competing models. Should Ukraine move towards consolidation in the coming years, or is maintaining a competitive free-market approach strategically preferable?

The right model is competition in innovation and standardisation in scaling. Ukraine’s strength has been diversity, speed, and adaptation under combat pressure. If you suppress competition too early, you lose the advantage that made the ecosystem effective.

At the same time, unlimited fragmentation is expensive. Too many models complicate training, spare parts, repair, upgrades, and supply chains. Ukraine should consolidate, but in a smart way: around a limited number of platform families and reference architectures, with common components, common interfaces, and clear baseline requirements. That gives the military predictability without shutting down innovation.

In procurement terms, the state can set standard performance envelopes and interoperability requirements, then select several best-performing families per category for mass procurement, while keeping a fast lane open for new entrants and niche solutions. A wartime market needs multiple suppliers to avoid single points of failure, but it also needs clear standards for what is produced at scale, supported properly, upgraded on time, and integrated into the broader command-and-control picture.