Ukraine in ‘final stages’ to set up three new JVs with European armsmakers

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By Olena Harmash

KYIV (Reuters) – Ukraine is close to setting up three new joint ventures with European weapons producers in its effort to boost arms output during the war with Russia, the first deputy prime minister said.

Yulia Svyrydenko, who is also the economy minister, said five joint ventures with Western weapon producers had already been set up, including with German and Lithuanian companies. Several arms producers have opened offices in Ukraine.

“We have three more agreements with European companies in the final stages to set up joint ventures,” Svyrydenko told Reuters in an interview in the government headquarters in central Kyiv. She gave no details about the planned new ventures or the scale of the investments.

Ukraine’s military industrial production has exploded in size with state and private companies rapidly increasing their production and innovating, as the government has scrambled to respond to Russia’s full-scale invasion in February 2022.

The authorities are still tight-lipped about details of the defence industry, but President Volodymyr Zelenskiy said in October that Ukraine could produce four million drones annually and was ramping up its military production, including missiles, a “drone missile” and transport vehicles.

To maintain momentum, the government has lured foreign funds and technology to transform domestic weapon production, boosting ammunition and equipment supplies to the battlefield against a better-equipped and larger enemy.

Germany’s weapons giant Rheinmetall has already launched its first defence factory in Ukraine, specializing in the maintenance of combat vehicles, with plans to start manufacturing Lynx infantry fighting vehicles by the year’s end.

Britain-based BAE Systems, Franco-German KDNS, the Babcock defence and aerospace company and MyDefence, which specializes in counter-drone technology, have teamed up with Ukrainian producers and set up local offices.

German weapons producer Flensburger Fahrzeugbau Gesellschaft is building a service centre in Ukraine jointly with a private Ukrainian weapons producer, Svyrydenko said.

Developing domestic defence production was a boost to the broader economy, which is still smaller than prior to the war despite two years of economic growth, she said.

The weapons production sector accounted for 1.8% of the country’s gross domestic product in the first half of 2024, compared with just 0.3% in 2021, she said.