Ukraine’s industry after four years of full-scale war

Despite relentless Russian strikes on its facilities and energy infrastructure, Ukraine has nonetheless managed to massively scale up its domestic defence production over four years of war, emerging as both a technological innovator and strategic partner for European nations seeking greater military self-sufficiency.

The full-scale Russian invasion of Ukraine, launched on 24 February 2022, has exposed critical challenges across the nation’s defence forces and defence industry. Both have been forced to swiftly adapt to wartime conditions by ramping up weapons production, repair, and modernisation amid sustained attacks from one-way attack (OWA) unmanned aerial vehicles (UAVs) and missiles. In the initial weeks following the Russian invasion, Ukrainian defence industry faced an existential threat, with Russian strikes focusing on core production facilities and storage sites for components and finished products. As a result, various experts at that time forecast a near-term collapse of the industry. However, after four years of military action, Ukraine not only managed to avoid this but even significantly increased production. According to Ukrainian officials, annual defence output was projected to reach USD 35 billion by the end of 2025, compared to just USD 1 billion annually before the war. At the same time, the defence sector has expanded to nearly 1,000 enterprises, roughly 80% of which are private companies, many founded since the start of the full-scale war.

Status of Ukraine’s defence industry: February 2022

On the eve of Russia’s invasion, Ukraine’s defence industry remained a largely archaic system shaped by its Soviet past. Most production capacity depended on outdated equipment, yet this did not prevent Ukraine from maintaining a notable position in global arms markets for years. The industry was traditionally export-oriented. Although the war that began in 2014 sharply reduced export volumes, Ukraine remained among the world’s nine largest arms exporters until 2016 and later consistently ranked within the top 15. Its key exports included modernised Soviet-era tanks such as the T-64BV, T-72, and T-84 Oplot; BTR-3, BTR-4, and Dozor-B armoured vehicles; aircraft engines and components; air defence systems; and marine gas turbines. At the same time, a substantial share of production capacity remained idle due to a lack of domestic orders.

State defence procurement was insufficient to sustain profitability across the sector. With most defence enterprises under state control, the industry remained heavily dependent on budget funding and lacked the flexibility needed to respond quickly to market demands. It was increasingly clear that, sooner or later, Ukraine’s defence industry would need to overhaul its approach to remain competitive on global markets.

 

At the same time, between 2014 and 2019, Ukraine succeeded in developing a range of new weapons, including various missiles, anti-tank weapons, self-propelled howitzers, UAVs, and light armoured vehicles. In practice however, most of these projects never moved beyond the pre-serial production stage. Under these circumstances, Russia’s full-scale invasion triggered a rapid and far-reaching transformation of Ukraine’s defence industry.

A critical period for industry: 2022-2023

In 2022, Ukraine’s defence industry shifted into emergency mobilisation mode, rapidly adapting its operations to meet the most urgent battlefield needs. Production priorities centred on critically needed weapons for the front, including drones and ammunition, alongside the repair of armoured vehicles and the accelerated introduction of new systems. These efforts were carried out in close coordination with international partners to respond to the urgent needs of the Ukrainian Armed Forces.

After February 2022, Ukraine lost a portion of its military production capacity as facilities were damaged, destroyed, or fell within Russian-occupied territory. At the same time, surviving enterprises began relocating to safer regions, a process aimed at preserving industrial continuity and sustaining output under wartime conditions.

An urgent effort to restore production facilities critical to the basic needs of the Ukrainian Armed Forces began almost immediately. In the first months of the war, the primary objective was to supply the army with at least minimal quantities of standard ammunition. In 2022, Ukraine established production of 152 mm and 122 mm artillery shells – essential for Soviet-era systems and largely unavailable from NATO stockpiles. To reduce vulnerability to missile strikes, production was dispersed across multiple locations. Ukrainian officials say industrial-scale output of these munitions was achieved by the end of 2022. In parallel, several types of ammunition, including 82 mm and 120 mm mortar rounds as well as tank shells, were produced for Ukraine at NATO-based facilities. Ukrainian enterprises also began repairing captured Russian equipment, most notably T-72 and T-80 tanks, armoured vehicles, along with BM-27 Uragan and BM-30 Smerch multiple rocket launchers (MRLs).

A pivotal moment in 2022, which shaped the character of current military operations, was the emergence of mass production of UAVs. Between 2022 and 2025, Ukrainian UAVs evolved from limited, experimental solutions into a systemic battlefield tool employed at multiple levels of military command. At the start of 2022, their use was fragmented and often depended on civilian drones adapted for military purposes.

This progress was largely driven by volunteers and small private teams. The trend gained official support in July 2022, when Ukrainian authorities launched the ‘Army of Drones’ programme, aimed at systematically developing the military UAV industry and supplying drones to the Armed Forces. Under the programme, Ukrainian UAV manufacturers were contracted to deliver various types of drones, provide maintenance and repairs, and train pilots. New units – companies of attack drones – were also established within the Armed Forces. These combined private and public efforts enabled a significant expansion of first-person view (FPV) drone and attack UAV capabilities in the years that followed.

Despite the organisational chaos of the war’s early months, the Ukrainian defence industry succeeded in producing essential equipment for the front lines and adapting to the Armed Forces’ evolving needs for new weapon systems. The period can be seen as a ‘reset’ for their industry: the conflict shattered old institutional patterns, allowing the most progressive sectors to thrive through a network of small and medium-sized private enterprises capable of operating even under regular missile and drone strikes.

Transformation

Between 2023 and 2025, the Ukrainian defence industry underwent a fundamental institutional and structural transformation, shifting toward a more flexible, innovation-driven model. In the summer of 2023, reforms began at Ukroboronprom, which was restructured into the JSC ‘Ukrainian Defence Industry’. The reform aimed to reduce the dominance of large state-owned enterprises, transferring a substantial share of production to the private sector. It also sought to simplify investment opportunities and enable the creation of joint ventures with private and international partners.

By 2025, private companies accounted for the lion’s share of Ukraine’s defence production, reaching as much as 90% in certain sectors, such as FPV drone manufacturing – a dramatic shift from the pre-war period. Several institutional innovations were pivotal in this transformation. One of the most notable is Brave1, a defence technology cluster launched in April 2023 that fosters collaboration among start-ups, investors, the military, and government agencies. Since its inception, Brave1 has attracted over USD 100 million in private investment, awarded 700 grants totalling UAH 2.6 billion, and registered more than 4,800 developments from 2,300 teams.

The platform has become a central driver in moving Ukraine’s defence industry from a traditional government procurement model to an ‘innovation–rapid verification–contract’ model, allowing military developments to be quickly tested and brought into production. Brave1 also introduced the so-called ‘Amazon for War’, a marketplace where the military can rapidly find and purchase equipment for the front, including drones, electronic warfare systems, ground robotics, and components. At launch, the platform featured over 1,000 solutions, with the number continuing to grow.

Since 2024, the Ukrainian Ministry of Defence has been implementing the ‘Danish model’ of financing, which allows foreign governments to provide direct funding to Ukrainian defence enterprises. Under this framework, the Ukrainian Armed Forces received approximately EUR 538 million worth of weapons in 2024. A notable example of this approach is Bohdana self-propelled artillery systems, whose production is financed under this model. The EU and nine countries have joined the initiative – Denmark, Canada, Lithuania, The Netherlands, Norway, Sweden, the United Kingdom, and the United States – funded through both domestic budgets and frozen Russian assets. The model’s key advantage lies in bypassing bureaucratic hurdles, thereby accelerating the delivery of weapons to the front lines.

By 2025, another important trend had emerged: Ukraine’s defence ecosystem now includes roughly 900 enterprises, of which around 100 are state-owned and 800 are private. The majority of new players are small private companies, often founded after 2022. Many began as volunteer teams or IT start-ups and, by 2025, had evolved into serial manufacturers with contracts worth hundreds of millions of dollars. This decentralisation has created fertile ground for innovation and new military developments. As Defence Minister Shmyhal noted, Ukraine is becoming a global hub for modern defence technologies and one of the most promising markets for defence investment, with the country’s production capacity increasing 35-fold in three years, despite the ongoing war.

Joint production with Ukrainian partners is also underway, with investments supporting the systematic scaling of industrial capacity. Currently, 25 foreign companies – including global defence giants – are at various stages of localising production in Ukraine. For example, Rheinmetall plans to build three military plants in the country to repair equipment, manufacture ammunition, and produce anti-aircraft systems. KNDS Deutschland has officially opened a joint venture with a Ukrainian defence firm to produce and repair equipment supplied by Germany. BAE Systems also has plans to manufacture and repair military equipment in Ukraine.

Key achievements of Ukraine’s defence industry

To date, enterprises within Ukraine’s defence-industrial complex are producing weapons that even some of the world’s largest economies do not manufacture. The industry’s current focus – experiencing rapid growth and scaling – is the production of various types unmanned systems, including aerial, ground-based, and maritime. Development and improvement cycles have been significantly shortened thanks to the ability to test these systems directly in combat. UAV production now accounts for roughly one third of Ukraine’s defence market, with an estimated 96% of drones used on the front lines are manufactured domestically.

According to Bloomberg, Ukraine produces approximately 4 million UAVs of various types annually, compared with roughly 100,000 in the United States. Their battlefield effectiveness has been repeatedly demonstrated: naval drones have reportedly reduced the potential of the Russian Black Sea Fleet by over 30%, and in 2025, around 4,000 drone attacks were recorded in Russia and occupied Crimea.

Mass production of drones, simplified government procedures, and the establishment of the Unmanned Systems Force are expected to drive further scaling in this sector, enhancing UAV range, payload capacity, and performance in both maritime and ground applications. A new trend has also emerged: Ukrainian unmanned technology companies are actively expanding their presence in Europe, creating joint ventures and attracting investment. Relocating some production abroad benefits both Ukrainian manufacturers and European partners. Following a series of airspace violations in Europe, NATO countries have increasingly invested in defence technologies, with Ukrainian drones becoming a benchmark for such programmes. To promote export potential, Ukrainian authorities have announced the creation of representative offices in Berlin and Copenhagen.

In 2025, alongside the rapid scaling of UAV production, Ukraine advanced the development of new long-range missiles. The Ministry of Defence made the missile programme a top priority, announcing that serial production of R-360 Neptune missiles, modernised for long-range target engagement, was underway. Production also began for the Palianytsia, Ruta, and Peklo drone missiles, which have already been used in combat. Plans called for the production of approximately 3,000 Ukrainian-made missiles over the course of the year.

The main sensation of 2025 was the presentation of the FP-5 Flamingo missile from the Ukrainian company Fire Point, with a claimed range of 3,000 km and a 1 tonne warhead. Although, according to the General Staff of the Armed Forces of Ukraine, these missiles were first used in the spring of 2025, work on their development and serial production is currently ongoing. Several more missiles were also unveiled in 2025, namely an improved version of the Neptune missile with a claimed range of 1,000 km, and the cheaper and simpler Trembita, which in different versions has a range of up to 200 and up to 1,000 km. The Trembita missile’s unique feature is its simple technology, making it easy to launch into mass production. If all goes well, we will likely see an increase in serial production of long-range missiles.

Closing thoughts

Over four years of full-scale war with Russia, Ukraine’s defence industry has not only withstood constant missile strikes on its production facilities but has also achieved an unprecedented transformation – rising from the brink of collapse in 2022 to become one of Europe’s most dynamic and innovative defence technology clusters. Annual production now reaches approximately USD 35 billion, supported by a network of 1,000 enterprises, the majority of which are privately owned. Ukraine’s experience offers a valuable benchmark for European countries, positioning Kyiv not merely as an aid recipient but as a full-fledged technological and manufacturing partner in strengthening their strategic autonomy amid the long-term confrontation with Russia.

Alex Horobets

Author: Alex Horobets is the Ukraine correspondent and regular contributor to ESD. He focuses on geopolitics, modern warfare, defence industry developments. Horobets has written articles on defence and security issues for various media and think tanks in the US and Europe.