Ukraine's growing arms sector thwarted by cash shortages and attacks

Record ID: 1819303

  • 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 billio
  • 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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