Ukraine to become “a military production hub” as counter-offensive stalls

Ukraine to become “a military production hub” as counter-offensive stalls
Over 250 international defence companies were in Kyiv to talk about setting up shop in Ukraine, as the government seeks to break the deadlock on the battlefield, where little progress has been made in months. / bne IntelliNews
By Ben Aris in Berlin October 2, 2023

Ukraine hosted an international defence industry conference in Kyiv on September 30. The country hopes to attract international arms manufacturers and make Ukraine a “large military production hub”, as the government searches for ways to arm itself and break a stalemate that has developed on the battlefield. 

Ukraine's President Volodymyr Zelenskiy suggested that the West create an “arsenal of the free world” in Ukraine where Western firms establish the production of shells, missiles and drones in the first Defence Industries Forum, which brought together representatives of 252 foreign military companies from over 30 countries. Defence ministers and representatives of several countries also attended the event.

Zelenskiy is ready to offer “special conditions” to companies that will produce weapons with Ukraine or on its territory. The event marked a new development in support of Ukraine, with the previous focus being on the delivery of weapons, repair of damaged equipment and military training of Ukrainian soldiers.

“Heroism alone cannot intercept missiles. Ukraine needs capabilities, high quality, high quantity, and quickly. There is no defence without industry,” said Nato Secretary General Jens Stoltenberg, who spoke by video link during the forum on the day after his visit to Kyiv.

As bne IntelliNews reported, Ukraine was running out of ammunition last year, and since then the West has invested almost nothing into ammunition production, leaving the AFU undersupplied and outgunned by their Russian opponents.

Next year Ukraine will likely come under more pressure as Russia’s 2024 budget has doubled the military spend to RUB10.8 trillion ($112bn), or 6% of GDP, as Russian President Vladimir Putin goes all out on the war and prepares for a long fight. Ukraine’s 2024 budget has also boosted military spending to 20% of GDP, but at UAH1,164bn ($33bn), Russia is spending three times more on its war effort than Ukraine.

Turkey had already promised to set up a Bayraktar TB2 drone factory in Ukraine before the war started and now says it is investing $100mn in three projects in Ukraine, among them the construction of a drone production plant that will be completed in one and a half years.

And last week leading German weapons maker Rheinmetall entered into a joint venture with Ukraine’s state-owned counterpart, the Ukraine Defence Industry group (UDI), to build facilities to make and repair weapons, Rheinmetall said on its website on September 29. The strategic co-operation between Rheinmetall and UDI, formerly known as Ukroboronprom, began in May 2023 but now the relationship will deepen.

British arms producer BAE Systems has also announced plans to team up with Ukrainian producers.

Ukraine’s Foreign Ministry said Ukrainian producers had signed about 20 agreements with foreign partners for joint production, exchange of technology or supply of components to make drones, armoured vehicles and ammunition. It did not identify the companies.

"It will be a mutually beneficial partnership. I think it is a good time and place to create a large military hub,” Zelenskiy said during a separate meeting with US, British, Czech, German, French, Swedish and Turkish weapons producers, Reuters reported.

Counter-offensive makes no progress

The focus on weapons comes as several recent reports say that Ukraine’s much vaunted counter-offensive is making very little progress. After a secret meeting between Ukraine’s high command and top Nato generals at the start of September saw a change of tactics and a concentration of Ukraine’s forces on the southern front, little new territory has been taken, despite reports that the AFU has broken through Russia’s defensive lines there.

The NYT ran a report that shows Ukraine has retaken almost no new land since the highly successful Kharkiv offensive last September and Russia’s withdrawal from Kherson at the end of the same month.

Another report shows that the least territory changed hands in August since the war started and that there have been no significant territory changes in the last month.


The war has now descended into a stalemate, with Ukraine unable to make any progress because of the limits on the supply and power of weapons being supplied by the West. Bringing production of arms to Ukraine would give Kyiv more options to increase the strength of its offensive.

It would also allow Kyiv to produce more armour that is more appropriate to the war it is fighting. The West’s supply of the modern German-made Leopard tanks was hailed as a major advancement when they were promised last year, but without the accompanying air support – the mooted supply of US-made F-16 will not arrive until at least next year – the Leopards have failed to make any significant impact on the battlefield.

Indeed, some have questioned the value of the supply of these high tech Western weapons. Western-made armour isn't working in Ukraine because it wasn't designed for a conflict of this intensity, Ukrainian analyst said in a recent interview with Business Insider.

Other weapons systems, like the highly accurate HIMARS missiles and the Javelin anti-tanks missiles, clearly have had a major impact and have inflicted devastating losses on the Russian forces.

But the armoured systems and tanks are susceptible to artillery and mines, which Russia has used liberally in its defensive lines and which have proved to be a fearsome challenge as Ukraine presses up against the extensive Russian defensive networks in the counter-offensive. Less than 5% of tanks destroyed since the start of the war had been taken out by other tanks, Ukrainian officials said in a Wall Street Journal report, with the rest falling to mines, artillery, anti-tank missiles and drones. The relative superiority of Western tanks vs the Russian Soviet-era vintage tanks counts for little in this type of fighting.

Taras Chmut, a military analyst who's the head of the Come Back Alive Foundation, which has raised money to purchase and provide arms and equipment to Ukraine, told Business Insider that "a lot of Western armour doesn't work here because it had been created not for an all-out war but for conflicts of low or medium intensity."

"If you throw it into a mass offensive, it just doesn't perform," he said.

Chmut went on to say Ukraine's Western allies should instead turn their attention to delivering simpler and cheaper systems, but in larger quantities, something Ukraine has repeatedly requested, the newspaper reported.

Nato on weapons supplies

Nato Secretary General Jens Stoltenberg arrived in Kyiv a few days earlier to meet Zelenskiy to talk about arms production. Stoltenberg has previously admitted that many Nato allies have significantly run down their stocks of weapons in order to support Ukraine and need to increase production if that support is to continue. “This was the right thing to do, but now we need to ramp up production, both to meet Ukraine’s needs and to ensure our own deterrence in events,” he said.

For example, the West has used up most of its stock of 155mm artillery shells and part of the motivation to supply Ukraine with the controversial cluster munitions is that they can be fired from the 155mm calibre guns and the West still has a large stockpile of these munitions.

Zelenskiy said he agreed with US President Joe Biden during his recent visit to Washington on “the establishment of a new industrial ecosystem that will strengthen both Ukraine and all the partners.” Zelenskiy described it as “one of the key outcomes” of his negotiations with Biden in Washington.

Zelenskiy’s chief of staff, Andriy Yermak, also said that there will soon be meetings with representatives from the US “to determine the road map of co-operation with the partners about localization of production, specifically in Ukraine,” Al Jazeera reported.

During the forum, Zelenskiy announced the creation of the Defence Industries Alliance and added that 13 defence companies have already signed the corresponding declaration. Ukraine plans to establish a special fund to finance the construction, which will be paid into through dividends from state defence resources and profits from the sale of confiscated Russian assets, Zelenskiy said.

Foreign Minister Dmytro Kuleba said talks on setting up production have been going on since last autumn. “At first, we were talking about repairs within Ukraine, and then about joint production. And now this topic is prevalent everywhere,” said Kuleba. “Just as we have benefited from Western weapons, Western arms manufacturers also gain unique advantages in the market to improve their models and create even more powerful weapons.”

Ukraine’s recently appointed Defence Minister, Rustem Umerov, said the country must do everything possible to produce all the necessary military services at home. The other priority is the development of defence technologies. Ukraine is also investing heavily into drone innovations, which have been used to devastating effect on the battlefield.

“Ukraine is in such a phase of the defence marathon when it is very important, critical to go forward without retreating. Results from the frontline are needed daily," Zelenskiy told executives at the forum. "We are interested in localising production of equipment needed for our defence and each of those advanced defence systems which are used by our soldiers, giving Ukraine the best results at the front today.”

Zelenskiy said that air defence and de-mining were his immediate priorities, followed by boosting domestic production of missiles, drones and artillery ammunition.