The Ukrainian defense-industrial complex has reached a point where exports are becoming not just an opportunity, but a condition for the survival of part of the industry. The defense-industrial complex’s potential capacity in 2026 is estimated at approximately $55 billion per year, but domestic demand is significantly lower. In 2025, production capacity was underutilized by at least 40%, which poses risks to teams, technologies, and the pace of innovation.
Ukraine has already developed one of the most dynamic defense-tech ecosystems in the world. Its strengths include real combat experience, rapid adaptation, proven effectiveness, and relatively low-cost solutions. Ukrainian drones, robotic systems, and digital platforms are increasingly expanding beyond the domestic market or becoming part of international cooperation. Examples include the TerMit ground system, the American Merops interceptor drone—which was tested in Ukraine—and the Ukrainian SkyMap platform, which is in use at a U.S. airbase in Saudi Arabia.
Demand for such solutions is growing against the backdrop of record-high global defense spending, which reached $2.88 trillion in 2025. Modern warfare has changed the concept of military superiority: expensive platforms no longer guarantee dominance. What is becoming more important is mass production, digitalization, production speed, and highly effective asymmetric solutions at a moderate price.
The main obstacle for Ukrainian manufacturers is not a lack of demand, but the complexity of obtaining government approval for exports. Even companies that are selected for international programs or find foreign customers cannot fulfill their contracts without permits from the Ukrainian government. In 2026, at least two private drone manufacturers reached the final round of the U.S. Pentagon’s Drone Dominance program, but this did not guarantee actual deliveries.
Formally, the approval mechanism exists: after an interagency commission was established under the National Security and Defense Council, more than 200 applications were reviewed. However, most were denied, with the exception of temporary exports of products for demonstrations or exhibitions. The procedure remains multi-tiered, lengthy, and opaque.
The “Defense City” regime is intended to simplify residents’ access to foreign markets, but most companies continue to operate under procedures that are more suited to peacetime than to the pace of modern warfare.
Opening up exports does not mean uncontrolled arms sales. The priority must remain supplying the Ukrainian army, and exports are permitted only for surplus products that have not been contracted by Ukraine or its partners for the needs of the Defense Forces. A distinction must also be made between less sensitive products from private manufacturers and strategic categories—missile technologies, air defense systems, ammunition, and certain dual-use goods.
Ukraine has an opportunity to carve out its own niche in the global arms market, which is dominated by the United States, France, Germany, and Italy. This requires predictable rules, shorter application review times, transparent criteria, long-term contracts, access to international infrastructure, and political support for exports. Without these, Ukrainian defense technologies may remain a local success, while competitors will quickly take over the global market.
❗️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.