Ukraine weighs lifting arms export ban in bid to scale up drone industry

Ukraine is moving towards lifting a wartime ban on drone exports, as officials and industry participants say it is imperative to scale up in order to match Russia’s capabilities on the battlefield.

Ukrainian forces are in desperate need of more aerial surveillance, cover and long-range attack drones. But with limited state resources available to pay for military supplies, drone companies are looking abroad to sell their excess production and generate the kind of revenue needed to manufacture more for the army.

Drone exports could bring Ukraine up to $20bn in revenue, “just the money that we lack”, said Oleksandr Marikovskyi, head of the Ukrainian parliament’s economic subcommittee looking at how drone exports will be regulated.

Since Russia’s full-scale invasion in 2022, Kyiv has banned the export of military goods, as it seeks to ensure its army gets all the supplies it needs. But the Ukrainian government lacks the financial resources to purchase all the available drones, let alone invest in further research and development, and allowing companies to export their excess production is now widely seen as a way of attracting investors.

Moscow, meanwhile, significantly stepped up its arms manufacturing, with Ukrainian industry participants putting Russia’s battlefield drone advantage at between 5 and 10 to 1.

Ukrainian troops “have a colossal shortage of drones”, said Dmytro Khasapov, head of Ukrspecsystems, one of the largest manufacturers of unmanned aerial vehicles (UAVs).

He spoke on the sidelines of the Defense Industries Forum in Kyiv last week, organised by the government in a bid to attract more foreign investors — and buyers.

Khasapov said his company was not receiving enough state contracts for its production capacity. “The state does not have the means to buy it.”

Ukraine’s state budget for weapons this year is just $6bn, about a third of which is for drones — far less than the orders needed to cover frontline demands.

For Ukrainian manufacturers, the only customers are the state and foundations that raise private funding for the military. This means companies often face short-term or delayed contracts and lack the long-term guarantees to buy and test expensive components, said Marikovskyi.

Ukrspecsystems is one of a handful of Ukrainian drones companies to recently start manufacturing their products in Poland in a bid to circumvent the export ban. Marikovskyi said the trend was worrying for Ukraine as it could lead to brain drain and dwindling tax revenues — all the more reason to reconsider the ban. He warned that without resuming exports, the price of drones made in Ukraine was likely to rise.

Roboneers, a Ukrainian producer of air and land drones, electronic jamming systems and cargo transport to frontline troops, told the Financial Times that they won public tenders at a price that only covers manufacturing costs.

“The biggest problem for every [Ukrainian] company is research and development,” said the company’s representative who declined to give their name for fear of being targeted by Russia. When choosing the best cameras to fit their devices, for example, Roboneers had to cover the cost of all the other lenses they tried out.

The industry’s hope is that lifting the exports ban will prompt western partners to allocate aid to Ukrainian manufacturers. Several partners pledged money to buy drones for the Ukrainian army made locally, but the programmes are still in their infancy.

Stands at the Kyiv fair showcased a range of cutting-edge UAVs, including devices that can hit long-range targets, land and sea robots, and technology that allows them to fly without GPS and in groups, like a flock of birds.

MyDefence, a Danish counter-drone tech company that sells devices that can detect and jam enemy drones, told the Financial Times it had just opened an entity in Ukraine so it could be ahead of Russian tech advances.

Russian forces have begun changing the frequencies of their drones, which meant manufacturers supplying Ukraine had to adapt and offer solutions, the company’s chief executive Dan Hermansen said.

After the war, “there will be a big export potential”, Hermansen said, given his company’s connections with the Nato ecosystem of defence orders. “That’s where we can help.”

Aside from investment, manufacturers say they are desperate for more standardisation and planning by the government.

Dozens of different types of drones acquired by the Ukrainian forces are all operating on different software, said Yuriy Kasiianov, a leading drone expert and commander who described the situation as a “zoo of drones”.

Artem Kolesnyk, the chief technology officer at Reactive Drone, a manufacturing company, said his sector also needed the type of policy direction that other types of weapons producers received.

“We do not currently have a programme that prepares qualified engineers in universities,” Kolesnyk pointed out. “We need to look at what we need in five, ten years because if you don’t look, then this whole [drone] industry will die or be bought out by someone.”