A Trap for Arms Makers: Why Ukraine’s Defense Tech Cannot Break Into the Global Market
According to estimates, its production potential has increased from $1 billion in 2022 to a projected $55 billion in 2026. At the same time, the state cannot purchase everything the industry is capable of producing. In 2025, Ukrainian and partner procurement of weapons amounted to nearly $24 billion, while the defense industry’s capacity was already estimated at $35–40 billion. At least 40% of production capacity remained unused.
The way forward for the sector is civilized and controlled exports. This is not about uncontrolled arms sales, but about using excess capacity that is not covered by state defense orders or partner contracts for the needs of Ukraine’s Defense Forces.
The problem is that the export control system was designed for a different reality — one in which the private sector in defense was almost invisible. Today, Ukraine has a new defense-tech ecosystem: more than 2,300 defense companies, around 1,000 private manufacturers, over 5,000 technological developments, and more than 400,000 specialists. They create modern solutions and have demand abroad, but face opaque and slow export approval procedures.
Formally, the system began to be relaunched in 2026: on February 12, the president established the Interagency Commission on Military-Industrial Policy and Defense Technologies, and on April 20, regulations governing its work were approved. Yet the main problem is already clear — the lack of understandable feedback for manufacturers. Companies may receive a rejection without any explanation and not understand what exactly needs to be corrected: documents, the contract, end-user verification, tax issues, or the technical description of the product.
As a result, manufacturers lose time, investors, and market opportunities. For the industry, this means lost foreign-currency revenues, taxes, investment in production, and jobs. For the state, it means the risk of losing the technological advantage Ukraine has built under wartime conditions.
The reform should not abolish control, but make it predictable. It would be reasonable to introduce reasoned decisions instead of “silent refusals,” clear deadlines for reviewing applications, digital tracking, standardized documents, and automated interagency data exchange. Ukraine also needs clear criteria for determining which products are critically necessary for the Defense Forces and which may be allowed for export.
A separate focus should be placed on a risk-based control model: end-user verification, monitoring of product use, identification of red flags, and rapid response specifically to risky transactions. For strategically sensitive categories — missiles, air defense systems, ammunition, and dual-use goods — a separate enhanced regime should remain in place. For verified partner states, it would be appropriate to create a “green corridor.”
Ukraine has already proven that it can create weapons capable of changing the course of war. The state’s task now is not to slow this force down, but to turn it into a long-term economic and technological advantage.
❗️The publication by the Center for Social and Economic Research (CASE Ukraine) was made with the support of the Civil Society Home of ISAR Ednannia as a part of the project «Strong Civil Society of Ukraine – a driver towards reforms and democracy,» funded by Norway and Sweden. The contents of this publication are the sole responsibility of the Center for Social and Economic Research (CASE Ukraine) and can in no way be taken to reflect the views of the Government of Norway, Government of Sweden and ISAR Ednannia.