After the fall of the Soviet Union, Ukraine had the fourth largest and most equipped army in the world. The country also inherited the third most powerful nuclear arsenal after the US and the Russian Federation, with about 1,272 nuclear warheads for intercontinental ballistic missiles in its bunkers.
Under the prevailing economic conditions of the 1990s, maintaining such an army in fair condition seemed an unlikely hope. Besides, the country harboured hope for a new, peaceful era where such a formidable army would not be necessary. As a young state, Ukraine has taken steps toward disarmament, being closely monitored by the United States and the Russian Federation.
Back then, certain approaches were formed to the country’s military-industrial complex, which had long-term implications. A huge amount of equipment looked beautiful statistics-wise, but from the first day it required maintenance and modernisation. The Soviet system assumed the production of individual components at various factories scattered across the Soviet republics and their further collection at centralised locations. So, for example, Ukraine lacked capacities for the production of combat helicopters, or various types of ammunition. Existing defence enterprises demanded reform and renewal of production capacities.
In this situation, the defence sector demanded “developing-State” programmes for the restructuring of the military-industrial complex. Instead, the principle was taken to re-equip the Armed Forces of Ukraine with weapons and military equipment from Soviet stocks. With this approach, the creation of new enterprises and the financing of defence industry reforms remained secondary. The creation of new defence enterprises, which were, in fact, badly needed, was constantly postponed. An important factor in this approach was the erroneous perception of military threats by the country’s political leadership: the outbreak of a regional war was considered unlikely. In these circumstances, by the 2000s, Ukraine had completely failed to tackle the consequences of the collapse of the military-industrial complex of the former USSR.
Losses of Defence Companies due to Russian Aggression
The military-industrial complex of Ukraine today consists of state-owned and private enterprises that fulfil the state defence orders and export contracts. Since 2014, there has been an increase in the efficiency of the Ukrainian defence industry and a rise in production volumes. After the termination of military-technical cooperation with Russia, the most important task was to establish mechanisms for importing substitutes for Russian components, as well as a reorientation to cooperation with other countries.
As a result of the annexation of Crimea, Ukraine has lost many defence enterprises. Today they are being exploited by Russia to produce its own military products. The Russian Federation looted from the Ukrainian Donbas the capabilities of a number of defence enterprises. Among them are Luhansk Cartridge Plant (the factory specialising in cartridge production, including the NATO standard 5.56x45mm); Topaz State Joint-Stock Holding Company (specialising in the development and production of complex radio systems and complexes, including long-range radio reconnaissance and early warning air defence systems); Snizhne Machine-Building Plant (which produced components for helicopter engines); and Yunost, which made components for the aerospace and aviation industries, among others.
In 2014, employees of Topaz Plant reported that Moscow-backed militants exported to Russia not only technical equipment, but also the finished MANDAT radar jamming system. Ukraine immediately took steps to restore at other defence enterprises the capabilities it had lost. For example, the Defence Industry Courier news agency reported that, in 2017, Iskra Research and Production Complex became the host of a new production line for military equipment, the MANDAT B1E electronic warfare complex and the R-330TRC electronic warfare station. In the same year, the enterprise handed over two new stations of the RE-R-330UM MANDAT-B1E complex to the Armed Forces of Ukraine.
Approaches to Modernising, Creating new Weapons
The state-owned Ukroboronprom has been playing the main role in the Ukrainian defence industry. Since its founding in 2010, the defence giant, which united disparate defence enterprises under a single brand, has been facing waves of criticism. However, in 2014, the Concern had to respond to an urgent demand for the production and repair of military equipment, and the enterprises that are part of Ukroboronprom upped the quantities of new weapons and military equipment production, also setting up the process of repair and modernisation of equipment that had been in storage. Circumstances indicated that in the foreseeable future the country could not do without the production of new, modern weapons with the latest developments and technology.
The Ukrainian defence industry is seeing a significant increase in funding. The press service of the Ministry of Economic Development of Ukraine says that financing has been increased 100 times in recent years – from UAH 30M in 2016 to UAH 3.2Bn in 2018. Defence companies have used these funds to implement more than 200 projects in the latest weaponry and military equipment. Since 2014, the country’s defence and security agencies have received about 26,000 weapons and items of military equipment, 7,000 of which are new or modernised models.
Thanks to the developments of the Kyiv-based State-owned Luch Design Bureau, domestic high-precision anti-tank weapons were created, including anti-tank systems that have already been used by Ukrainian troops in the East of the country. According to the report, certain features of Ukraine-made weapons even surpass those of US-made JAVELINS.
A number of projects have been implemented in armoured vehicle production. Upgrades continue of the OPLOT main battle tanks, which, in particular, are being exported to Thailand. According to Defence Industry Courier, by 2018 about a dozen new research and development projects had been successfully implemented in relation to the said MBT. According to the Chief of the Defence Express consultancy, Serhiy Zgurets, the Ukrainian Army will boast of its first complete OPLOT tank company as early as 2019-2020.
Work has continued on modifications to the BTR-4MV1 APC, which in 2017 underwent factory tests. This combat vehicle was produced using technological solutions in line with the latest trends in the development of armoured vehicles in NATO countries, as well as using the experience of BTR-4 operations in the combat zone. Thanks to the modular principle, the BTR-4MV1 can quickly be adapted to perform specialised tasks: modifications range from a patrol reconnaissance vehicle to an amphibious vehicle for the Marines.
In August 2019, Ukroboronprom’s press service announced that Lviv Armoured Plant launched a serial modernisation of the T-64 tanks of the 2017 model. During modernisation, a new gunner sighting system with a thermal imager is installed, ensuring enemy detection, recognition and destruction at any time of the day and in any weather conditions. In addition, the T-64 / 2017 received a new dynamic protection and a satellite navigation system by Orizon-Navigation SE. The navigation complex operates in an automated digital system, allowing online data exchange via encrypted channels. The MBTs are equipped with the new LYBID K-2RB digital radio stations, providing reliable protection against interference and interception of communications at distances up to 70 km.
Thanks to the capacities of Lviv Armored Plant, the process of re-equipping the Ukrainian Army with modernised vehicles will go much faster, since previously it was only Kharkiv Armoured Plant that was able to upgrade T-64 tanks to this level. Ukroboronprom notes that, given stable orders and financing, the capacities of two tank enterprises will allow for modernisation of all T-64s in the near future.
One of the priorities of modernisation and rearmament in recent years has been the creation of missiles and missile systems. In particular, to upgrade Ukraine’s coastal defences, tests were carried out of the NEPTUN anti-ship complex, capable of hitting targets at a distance of up to 280 km. According to the claimed features, the complex works effectively under counter-fire and electronic warfare countermeasures. The system is already actively offered for export in coastal and missile versions. An air-based version of the NEPTUN anti-ship missile, designed to be carried on such aircraft as SU-24s and Su-27s, has also been announced.
In 2018, tests were conducted of the VILKHA multiple launch rocket system developed by the State-owned Luch Design Bureau, which led to the decision to start serial production and to take it into service. VILKHA has a range of about 70 km, allowing the operator to assign each missile a separate target. In 2019, it was announced that production of the VERBA multiple launch rocket systems and the VILKHA launchers were launched at the Shepetivka Repair Plant, and supplies to the Army would soon begin. The VERBA MLRS is the new generation of GRAD, equipped with modern navigation gear and improved platform stabilisation to enhance accuracy. It is capable of hitting targets at 40 km range.
Serhiy Zgurets, head of the Defence Express consultancy, notes that Ukraine does not focus on creating a single type weapon, instead opting to develop a wide variety.
In 2018, Yuzhnoye Design Bureau was actively working on the creation of SAPSAN, an operational-tactical complex able to strike targets at a range of up to 500 km.
In early 2019, Chief of the General Staff of the Armed Forces of Ukraine, Viktor Muzhenko, announced the completion of tests of the upgraded KUB and TOR anti-aircraft missile systems, which are set to enhance the potential of the Armed Forces and the country’s air defence system. In 2018, the Ministry of Defence of Ukraine decided to modernise and return to service both anti-aircraft missile systems.
In recent years, private defence enterprises have reached a new level of quality. According to Defence Express there are about 200 private defence enterprises with positive potential operating across Ukraine. Private enterprises take half of the orders from the Armed Forces of Ukraine, determined by the State Defence Order. In addition, exports of private defence enterprises is also increasing. In August 2019, the Government of Ukraine, by resolution, entitled a number of private defence enterprises to export and import military goods of their own production. Among them are Raidoniks, Ukrainian Armoured Vehicles, and Praktika.
Ukrainian Arms Exports
A significant share of Ukrainian arms and military equipment supplies is armoured vehicles and tanks. According to the State Export Control Service of Ukraine, from 2014 to 2018, Ukraine sold almost 200 combat vehicles. In particular, in 2014, exports of armoured combat vehicles stood at 28 units, including 15 BTR-3E1s and 2 BTR-3M2s to Thailand, 10 BTR-4ENs to Nigeria, and a BTR-4 to the US. Ukraine exported 20 armoured combat vehicles to Thailand: two BTR-3M1s, a BTR-3M2, six BTR-3RKs, two BTR-3BRs, a BTR-3S, and eight BTR-3E1s.
In 2016, Ukraine exported 147 armoured vehicles to the UAE, Thailand and Indonesia. Also, Ukraine was exporting tanks. From 2014 to 2018, 107 battle tanks were exported. A significant part of the exports was bound for Thailand.
In July this year, Ukroboronprom announced that the first BTR-3KSh machine kit (command vehicle) was delivered to Thailand for licensed assembly. Ukroboronprom CEO Pavlo Bukin considers the move a marker of deepening cooperation between Ukraine and Thailand – the country’s strategic partner in Southeast Asia. Also, according to Mr Bukin, the expansion of export supplies is the only way to ensure the innovative development of companies that are part of Ukroboronprom.
Ukraine is successfully exporting anti-tank missile systems developed by Luch Design Bureau. A major buyer of ATGMs is Saudi Arabia, where in 2018 a total of 950 launchers and ammunition were delivered. In 2019, Saudi Arabia continued procuring ATGMs. Among other buyers of the Ukrainian STUHNA and KORSAR anti-tank missile systems are Jordan and Egypt.
In March 2019, Ukraine’s Spetstechnoexport SE announced the signing of contracts with the 30 countries that are the main export partners. Among them are India, Algeria, Myanmar, China, and Equatorial Guinea. Basically, the business will be about modernisation of Soviet aviation equipment, armoured vehicles and air defence systems.
The European market takes up several percent in the structure of Ukrainian arms exports. Cooperation with Poland is worth highlighting; in 2016, a total of 40 R-27 guided missiles were sold there. According to the former deputy CEO of Ukroboronprom, Denys Hurak, Poland was the first country to understand that it was strategically important for them to cooperate with Ukraine in defence production. A number of joint projects are now being implemented, ranging from ammunition to radar equipment.
The trend of deepening cooperation in the defence sector with other countries should be noted. In particular, Ukrainian defence enterprises continue to cooperate with Turkey. Ukraine already uses the Turkish BAYRAKTAR TB2 strike drone. According to media reports, six strike drones, two control stations and 200 guided missiles were included in the contract. In August 2019, it became known that Ukrspetsexport and Baykar Defence of Turkey created a joint venture in the field of precision weapons and aerospace technologies. The main goal of combining the capabilities of the two countries’ defence companies is to establish mass production of new models of modern weapons for their respective armies. The first project will be to develop a new generation of strike drones.
Ukraine continues its cooperation in the defence sector with the US and Canada. According to the Embassy of Ukraine in the United States, by the end of 2019 a contract for the purchase by Ukraine of a large batch of lethal weapons may be implemented. Following a meeting between Ukraine’s Minister of Internal Affairs and the Minister of Defense of Canada, reports came that preparations were underway to sign a contract for the supply of modern armoured vehicles and certain weapons components to Ukraine.
According to Defence Blog, facilities are being set up in Myanmar for the production of armoured vehicles and Self-Propelled Artillery, as well as aircraft and ship engine repair.
As part of the 53rd Paris Air Show 2019 at Le Bourget, a number of joint defence projects were launched between Ukraine and the United Arab Emirates. Among the most promising ones is the establishment of joint production of unmanned aerial vehicles based on projects by Antonov SE. Ukroboronprom CEO Pavlo Bukin considers the markets of the Middle East and Southeast Asia to be promising for Ukrainian An-family aircraft, since such planes are capable of operating in extreme climatic conditions and they fully meet the requirements of military and rescue operations.
In August 2019 reports also arose that Ukroboronprom had won a tender by the Ministry of Internal Affairs of Peru for the purchase of military transport aircraft. In the Peruvian tender, the Ukrainian An-178 beat the C-27 SPARTAN (US/Italy) and C-295 (Airbus). According to Pavlo Bukin, Peru may become a “pioneer” for the import of new aircraft created at Antonov SE. The An-178 completed its first flight on May 7, 2015 and is now in the process of certification. In July 2018, Ukroboronprom showcased the An-178 at the Farnborough Airshow, where the aircraft performed a demonstration flight.
Reforming the Ukrainian Defence Industry
In 2018, the Government of Ukraine adopted the Defence Industry Development Strategy, through to 2028. This document defines the long-term priorities of State policy in the field, and direction for implementation of medium-term defence industry reforms. The Strategy’s main goal is to create conditions for the modernisation and accelerated development of the military-industrial complex, building up own production capacities to meet the needs of the Armed Forces, as well as manufacturing weapons and military equipment that are competitive on the world market. The implementation of the Strategy should allow for comprehensive restructuring of State governance of the defence industry, as well as defence companies’ organisational and production performance. It is in relation to State governance of the defence industry that most discussions are unfolding at the expert and State levels. As for the modernisation of military equipment and new developments, Ukrainian enterprises are implementing a wide range of projects.
Meanwhile, Washington has been closely watching the reform of the Ukrainian defence industry, and according to the League of Defence Enterprises of Ukraine (an association of private Ukrainian enterprises and organisations producing defence and dual-use products), a US delegation led by Donald Winter, a senior defence reform advisor, visited Ukraine in June 2019. The American delegation looked into the potential of the national defence industry’s private segment, as well as the current state of affairs in Ukraine’s defence and security sector. According to estimates, the recommendations prepared during the visit could shape Washington’s updated policy on bilateral military-technical cooperation with Kyiv. In particular, reform is expected of Ukroboronprom Concern, of State governance in the defence industry, further integration of the national defence industry into the global arms and military equipment market, and the removal of regulatory restrictions in order to attract private investment in the defence sector.
Against the background of presidential elections in Ukraine, discussions on reforming the defence industry and enhancing defence management received a boost: it is precisely defence reform that many believe is one of the challenges facing Volodymyr Zelensky, above all regarding Ukroboronprom. The President’s first foray into the foreign political arena showed that he pays due attention to security and defence: during his official visit to Turkey an agreement was signed on setting up a joint defence enterprise. Also, the Ukrainian President and the Prime Minister of India, Narendra Modi, have tentatively discussed expansion of military-technical cooperation between India and Ukraine.
Alex Horobets is an analyst for international and Arctic affairs based in Kyiv, Ukraine.