- Title: Ukraine's growing arms sector thwarted by cash shortages and attacks
- Date: 19th April 2024
- Summary: UNDISCLOSED LOCATION, UKRAINE (APRIL 9, 2024) (REUTERS) VARIOUS OF UKRAINIAN-MADE ARMOURED VEHICLE DRIVING ON ROAD VARIOUS OF MEN WORKING ON ARMOURED VEHICLE KYIV, UKRAINE (APRIL 15, 2024) (REUTERS) (SOUNDBITE) (Ukrainian) UKRAINE’S STRATEGIC MINISTER, OLEKSANDR KAMYSHIN, SAYING: “At the moment, the general capacity of Ukraine’s military-industrial complex is $18-20 billion per year. We (Ukrainian government) fund only a third of the capacities.” UNDISCLOSED LOCATION, UKRAINE (APRIL 9, 2024) (REUTERS) VARIOUS OF MEN WORKING ON ARMOURED VEHICLE KYIV, UKRAINE (APRIL 15, 2024) (REUTERS) (SOUNDBITE) (Ukrainian) UKRAINE’S STRATEGIC MINISTER, OLEKSANDR KAMYSHIN, SAYING: “We have the biggest fight in a generation. And the need of our Defence Forces is much higher than the output capacity of all the free world combined. If you look, for example, at NATO-calibre artillery shells, the production capacity of the U.S. and EU put together is lower than our needs.” UNDISCLOSED LOCATION, UKRAINE (APRIL 9, 2024) (REUTERS) VARIOUS OF MEN WORKING ON ARMOURED VEHICLE KYIV, UKRAINE (APRIL 15, 2024) (REUTERS) (SOUNDBITE) (Ukrainian) UKRAINE’S STRATEGIC MINISTER, OLEKSANDR KAMYSHIN, SAYING: “Speaking about our military-industrial complex, it is around 400 private enterprises and 100 state-owned enterprises. But if we talk about the financial capabilities of the enterprises, about their output capacity, the majority of production is still in the hands of the state. The private sector is growing quickly – I am convinced that in five years the absolute majority of (weapons) manufactured in Ukraine will be private.” (SOUNDBITE) (Ukrainian) UKRAINE’S STRATEGIC MINISTER, OLEKSANDR KAMYSHIN, SAYING: “Even on the President’s level we are looking for additional financing. I am sure that we will find financing among our international partners. There are a couple of countries which we are in talks with that consider the possibility to finance the procurement of military equipment made in Ukraine directly and to transfer it for the needs of our Defence Forces. I am sure that as soon as the first contract of the kind will take place, other countries will join, and we will have permanent flow of international financing for the procurement of military equipment made in Ukraine for our Defence Forces.” UNDISCLOSED LOCATION, UKRAINE (APRIL 9, 2024) (REUTERS) VARIOUS OF MEN WORKING ON GRENADE LAUNCHER UNDISCLOSED LOCATION, UKRAINE (APRIL 8, 2024) (REUTERS) VLADYSLAV BELBAS, CEO OF UKRAINSKA BRONETEKHNIKA, SPEAKING TO REUTERS REPORTER (SOUNDBITE) (Ukrainian) CEO OF UKRAINSKA BRONETEKHNIKA, VLADYSLAV BELBAS, SAYING: “The first threat that makers come up against when they start working is the bureaucracy of the military sphere and of purchases. This is what the businesses don’t expect when they start this kind of work.” BELBAS IN HIS OFFICE BULLET-DAMAGED GLASS (SOUNDBITE) (Ukrainian) CEO OF UKRAINSKA BRONETEKHNIKA, VLADYSLAV BELBAS, SAYING: “In 2022-2023, we did not have electricity for two-thirds of our working hours – of course, under such conditions it is very difficult to manufacture anything." UNDISCLOSED LOCATION, UKRAINE (APRIL 9, 2024) (REUTERS) VARIOUS OF MEN WORKING ON ARMOURED VEHICLE
- Embargoed: 3rd May 2024 07:00
- Keywords: Military aid Russian invasion War in Ukraine Weapons production
- Location: UNDISCLOSED LOCATION, UKRAINE / KYIV, UKRAINE
- City: UNDISCLOSED LOCATION, UKRAINE / KYIV, UKRAINE
- Country: Ukraine
- Topics: Conflicts/War/Peace,Europe,Military Conflicts
- Reuters ID: LVA001613918042024RP1
- Aspect Ratio: 16:9
- Story Text: Hundreds of Ukrainian businesses making weapons and military equipment have sprung up since Russia's full-scale invasion, but some are struggling to fund production and must operate amid intensifying missile strikes and looming power cuts.
Owners say they have pumped in their own cash to survive, and are urging the government to place more orders and cut what they describe as excessive red tape around arms sales.
Several also want to be allowed to export, arguing that the government is not able to buy all of their produce.
According to Ukraine's strategic industries minister Oleksandr Kamyshin, the potential annual output of the military-industrial complex now stands at $18-20 billion.
Ukraine's cash-strapped government can only fund about a third of that, the minister told Reuters in an interview. That compares with $120 billion of military aid Ukraine has received from allies throughout the war.
Many of Ukraine's large, state-owned defence enterprises fell on hard times after the collapse of the Soviet Union. Now the war has triggered a resurgence in the private arms sector.
According to his ministry, the number of private defence manufacturers has doubled since the invasion and now outnumbers state-owned ones by about 400 to 100, although state enterprises still accounted for the majority of production capacity.
To resolve cash shortages, Ukraine is asking foreign partners to fund its defence production, and on Tuesday Denmark pledged $28.5 million.
Some manufacturers say they are struggling to raise funds, a problem compounded by a government procurement process that they complain is slow and cumbersome.
"The first threat that makers come up against when they start working is the bureaucracy of the military sphere and of purchases," said Vladyslav Belbas, CEO of Ukrainska Bronetekhnika, one of the few Ukrainian manufacturers making armoured vehicles and artillery shells, among other products.
Belbas cited the fact that the defence ministry only places orders for the current year, hampering makers' ability to plan for the long term.
Private investment in Ukraine's arms sector has primarily been driven by domestic entrepreneurs, many of whom say their motivation is to help Ukraine in its hour of need rather than to make money.
This can mean that businesses sometimes struggle to scale up due to a lack of capital.
One way to raise money is to grant licences for companies to export products that would otherwise go unbought by Ukraine due to the lack of financing. However, this is a sensitive political issue during wartime and has not been allowed.
Three manufacturers told Reuters they would like to see export licences being granted, provided the manufacturer had unused capacity not covered by orders from Ukraine.
The source in government said Ukraine's leadership opposes allowing wartime exports as they could undermine Ukraine's pleas for military aid from abroad.
Aside from financial difficulties, making weapons in Ukraine during a full-scale war is fraught with risk.
When Reuters visited a factory of Ukrainska Bronetekhnika, the head of the plant, who gave his name as Ruslan, agreed to speak only if his face was not shown to protect him from becoming a target of Russia's intelligence services.
The factory, which employs 67 people and makes armoured vehicles and mortars, was in the process of being wound down and moved to another location.
Ruslan said this was because a bigger premises was needed to accommodate more staff, as well as to make it harder for Russian intelligence to find the factory. Some arms manufacturers move locations as often as every three months for security.
Another problem faced by manufacturers is the threat of power cuts, as Russia pounds energy infrastructure while Ukraine is running out of air defence munitions to protect its skies.
The government source said that manufacturers currently had no issues with power supply, and that if mass power cuts did have to be implemented then they "will be switched off last."
(Production: Anna Voitenko, Andrii Pryimachenko) - Copyright Holder: REUTERS
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