Ukraine’s War-Tech Stalemate: High Demand Abroad, Roadblocks at Home
Ukraine’s defense firms innovate fast but face export hurdles, funding gaps, and relocation risks amid rising global demand
Ukrainian drone and EW producers face growing international demand but remain blocked by vague export rules, low state orders, and missing standards. Despite battlefield-proven tech, most operate far below capacity, with many planning relocation. Experts urge controlled exports and long-term contracts to retain talent and scale production, warning that delays risk losing both market leadership and strategic advantage.
When Ukrainian defense manufacturers arrived at arms expos in Brussels, Vilnius, and Poland this spring, they came with something the world is beginning to crave: battlefield-tested drones and electronic warfare systems that have changed the face of 21st-century combat.
“Europeans want what we’ve built,” says Anatoly Khrapchynsky, an aviation expert and deputy director of a Ukrainian electronic warfare (EW) firm. “But they ask the first question: does it meet NATO or EU standards? And we can’t always answer, because those standards often don’t even exist for what we’re offering.”
In truth, Ukrainian drones — particularly the nimble, cost-effective FPV models that swarm enemy armor and command posts — have outpaced Western military doctrine. Where NATO has traditionally imagined drones as remote-controlled jets like the F-35, Ukraine has shown what a few hundred well-flown FPVs can do for a fraction of the price.
The Irony of Innovation
Ukraine’s defense tech sector has never been more innovative — or more hamstrung. While countries from Asia to Western Europe quietly signal growing interest in Ukrainian unmanned aerial vehicles (UAVs) and electronic warfare gear, Ukrainian firms remain boxed in by bureaucratic gridlock and export restrictions that, as experts argue, are more policy inertia than law.
“We’re not facing a sanctions wall or foreign resistance,” says Khrapchynsky. “The real issue is structural — missing standards, unpredictable financing, and a domestic market that can’t or won’t absorb what we can produce.”
It’s not just frustrating — it’s a missed opportunity on a billion-dollar scale. In 2024, Ukraine’s private arms sector operated at just 37% of its capacity. Over 1.7 million drones and EW units sat unproduced or unpurchased, despite demand from both the Ukrainian frontlines and foreign partners.
“If you laid those drones out on a football pitch, they’d cover over 50 stadiums,” says Kateryna Mykhalko, executive director of Ukraine’s Technological Forces (TSU), a non-governmental group that supports defense startups. “That’s the scale of lost potential.”
Export, or Evaporate
A recent survey by TSU revealed a worrying trend: 85% of private defense firms are either relocating abroad or planning to. The top destinations? Poland, Czech Republic, the U.S., Slovakia, and Estonia — countries that offer what Ukraine doesn’t: predictable rules, export opportunities, and state-level interest in advanced weapons systems.
“The number one reason companies are leaving is the export restrictions,” Mykhalko confirms. “Even though there’s technically no legal ban, every export license for high-tech systems gets denied.”
This denial, according to TSU, is recurrent and unexplained. Companies file applications, undergo strict security checks by Ukraine’s security service and defense ministry, and yet still end up facing a wall of silence — or outright rejections.
“This is about control, not chaos,” says Mykhalko. “We’re not asking to ship drones to rogue states. We’re talking about selling to allies — the same countries giving us aid. The same countries who could help us scale, invest, and survive.”
A Billion-Dollar Question
While Russia boasts $55 billion in new arms export deals since its 2022 invasion of Ukraine, Ukrainian manufacturers remain on the sidelines, unable to monetize the very war they're fighting.
“We are the only democracy on the planet with real-world experience in asymmetric warfare at this scale,” Mykhalko argues. “We shouldn’t let an authoritarian state be the only one exporting that knowledge. It’s not just a market question — it’s an image question.”
Indeed, what Ukraine offers isn’t just hardware. It’s battle-proven knowledge. A drone that costs $500 and takes out a $5 million tank. A jamming system that blinds enemy radars without needing a billion-dollar satellite.
But instead of building partnerships, Ukraine's innovators are being asked to wait.
“Our companies are only running at 40% capacity,” says Khrapchynsky. “Imagine what we could do if we had consistent funding or a clear path to export. We don’t need charity. We need access.”
Europe Listens — But Moves Slowly
Signs of change are emerging. French defense giant Thales is reportedly in talks to co-create R&D hubs with Ukrainian firms. Several EU countries are now pushing for clearer UAV and EW standards. But for now, these are memoranda — not contracts.
And without cash flow or state guarantees, innovation risks stalling.
“European standards are not a barrier,” says Khrapchynsky. “They’re an opportunity. But we have to be invited to the table. We can meet these standards — we just need the will to do it.”
Back home, that political will seems elusive. With no long-term state defense orders, no functional export path, and growing security threats, companies are hedging their bets abroad.
“Ukraine is not a victim,” Mykhalko emphasizes. “We are a partner. We are a technology leader. And in this new age of danger, we’re the only country that has actually figured out what works.”
The Bottom Line
Ukraine has the products. It has the experience. It has the interest of the allies and the respect of global defense leaders. But unless the government unlocks export pathways and begins treating its defense innovators as strategic partners — not just contractors — the country may find its cutting-edge tech making waves from Warsaw or Prague, rather than Kyiv.
And as Mykhalko puts it:
“We don’t want to ask the world for help forever. We want to sell to it.”