Immediately after Russia’s full-scale invasion of Ukraine, in February 2022, Ukrainian leaders pleaded with their American and European partners to help protect the skies over their territory. NATO’s air defense systems could protect Ukraine’s civilians, troops, and infrastructure from Russian missiles, albeit with a hefty price tag and a risk of escalation. Western leaders declined.
Today, it is Ukraine’s military assistance that is in demand. In response to a joint attack by the United States and Israel in late February, Iran began firing hundreds of missiles and drones at U.S. partners across the Middle East. The vast majority of the missiles have been shot down, but Iran is currently producing its offensive weapons faster and more cheaply than the United States, and its allies are producing defensive ones. Now, Washington and its partners in the Gulf are turning to hundreds of advisers sent by Kyiv to help them bring down barrages of expendable Iranian attack drones.
After four years of the most intense drone warfare in history, Ukraine has become Europe’s foremost practitioner of drone interception, layered air defense, electronic warfare, and unmanned systems. And it has learned to deploy these technologies effectively, cheaply, and at scale. American-made air defense systems such as the Patriot and THAAD are effective but expensive and scarce. The economics of shooting down a $35,000 Shahed drone with a $3.7 million missile is only made worse by having to wait in line for a costly replacement. Meanwhile, Iran can draw from its own stockpiles of Shaheds or purchase more from Russia, which produces hundreds of them daily.
Ukraine’s ingenuity in producing novel substitutes such as interceptor drones—small craft designed to destroy larger, slower Shaheds in flight at one-tenth their cost—has been driven both by necessity and a fiercely competitive domestic market. Ukraine is even developing and deploying laser systems, offering an early glimpse of what air defense with negligible per-use cost could look like once the technology matures.
If Europe is to be prepared for modern warfare, it, too, will need to draw on Ukraine’s expertise—especially as the continent takes on more responsibility for its own defense rather than relying on the United States. Ukraine fields the largest, most battle-hardened standing army in Europe, and it holds an estimated $25 billion to $40 billion in defense-related production capacity that sits idle for lack of capital investment. With an infusion of capital from European companies, Ukraine can help Europe build its deterrence against Russia without detracting from its own war effort. But for European partners to benefit from Ukraine’s defense industrial dynamism, both need to knock down regulatory and financial barriers.
Ukraine is lifting its de facto ban on arms exports but still needs a clear path for its defense manufacturers to work with other European ones. European governments, in turn, should make joint ventures less risky by offering procurement guarantees, insurance backstops, and tax incentives that draw private capital toward Ukraine. Ukraine is Europe’s untapped arsenal—and with better defense integration, it can help protect the entire continent.
WHAT UKRAINE HAS BUILT
Before February 2022, Ukraine’s defense industry was of modest size by European standards; its military procurement budget was less than $1 billion. It was not cutting-edge—a legacy of Soviet-era manufacturing—but supplemented by a growing technology sector. After Russia’s invasion, the defense sector evolved fast. With Russian forces targeting Ukrainian manufacturing, energy systems, hospitals, and transportation infrastructure, and with foreign military aid at times slow to arrive, the country became an incubator for decentralized, constantly improving weapons development. Soldiers, startups, volunteers, and government agencies fused into a single ecosystem in which a product could move from prototype to frontline deployment within weeks.
The results have been extraordinary, particularly in unmanned systems. By early 2025, Ukrainian soldiers were using drones in 80 to 85 percent of all frontline strikes. Today, Ukraine fields first-person-view drones, guided by pilots via a live feed, that cost $500 to $2,000 per unit, allowing the armed forces to hit tens of thousands of targets each month. It has also developed long-range missiles such as the FP-5 Flamingo that are capable of reaching Russian bases and oil refineries 1,800 miles away; interceptor drones that bring down Russian reconnaissance and attack drones for a tiny fraction of the cost of a surface-to-air missile; maritime drones that have effectively expelled Russia’s navy from the western Black Sea; and unmanned ground vehicles that have begun to transform frontline logistics and casualty evacuation. More than 200 Ukrainian companies are developing unmanned ground systems; the pace of development and deployment is without parallel in NATO countries.
Ukrainian manufacturers now operate within a feedback loop that is impossible to replicate in peacetime. A drone that underperforms is pulled from the field within days. A design flaw identified by a frontline operator reaches the engineering team the same afternoon. Soldiers and engineers can often make adjustments on the spot themselves, as many brigades run their own repair facilities, small R & D units, and 3D printing stations. The result is a defense industry in which market pressure and battlefield reality eliminate ineffective products and companies—with a speed that procurement bureaucracies in Brussels, Berlin, or Paris cannot match.
Ukraine is also ahead of the rest of Europe in the military capabilities that will shape battlefields for the next decade. It has improved, adapted, and scaled up autonomous navigation systems that function without GPS in heavily jammed environments; swarm coordination software that allows multiple drones to synchronize attacks with minimal operator input; fiber-optic drone control that is effectively immune to Russian electronic warfare; and AI-powered targeting that can identify and guide a strike with limited human intervention.
EUROPE’S DEFICIT
Meanwhile, in the rest of Europe, post–Cold War demilitarization and outsourcing to the United States have left defense industries structurally incapable of meeting the demands of a sustained high-intensity conflict. In virtually every domain—artillery shell production, missile stockpiles, drone manufacturing—European capacity is a fraction of what the continent needs to deter Russia. Now, with the U.S. military increasingly occupied in other theaters, Europe faces this gap without the backstop it has long relied on.
Drones illustrate the gap most vividly. Ukrainian drone pilots stunned NATO commanders during military exercises last May in Estonia. The Ukrainian team effectively wiped out two NATO battalions in a single day—before NATO could even deploy its own drones. Ukraine can produce up to ten million drones per year. The entire U.S. small drone manufacturing base produces fewer than 100,000; Europe’s output is not meaningfully better. And unlike Ukraine, neither the United States nor Europe has substantively incorporated drones into doctrine, training, and institutional frameworks.
Europe is currently spending hundreds of billions of euros to rebuild its conventional defense capabilities and develop technologies that Ukraine is already using in combat. But cutting-edge technology must complement conventional arms, not replace them, and European rearmament will need to balance innovation with traditional systems. This is precisely where Ukraine fits into the larger European picture. It is strongest in the areas in which Europe is weakest: unmanned systems, rapid innovation cycles, resource efficiency, and industrial scale.
CLOSING THE GAP
Europe must now recognize Ukraine for what it is: a contributor to, not just a recipient of, European security. Cooperation benefits the whole continent. European defense industries bring experience and capital, but they will require Ukrainian help to produce new technologies cost-effectively and at scale. Some joint ventures have already begun production as a result of government-to-government negotiations, but much more needs to be done.
Both sides are open to cooperation, yet regulatory barriers and misaligned incentives have gotten in the way. Ukraine, for instance, has had an effective export ban on defense-related products since the Russian invasion. In January, the Ukrainian government took initial steps to relax those restrictions, and President Volodymyr Zelensky has announced that Ukraine will open ten defense export centers across Europe by the end of the year. But removing his country’s export controls alone will not lead to a surge in exports and joint ventures. For that to happen, European and Ukrainian officials must make these investments less risky for private companies and ease regulatory burdens, such as the requirement that government approval be sought for each cross-border defense industrial partnership. Both sides, in effect, need to subsidize the formation of these ventures with the expectation that they will yield national security dividends.
In Europe, governments should offer procurement guarantees, insurance, and tax breaks to make joint ventures attractive for private firms. European defense companies are profit-driven: access to Ukrainian battlefield technology and know-how is attractive, but not attractive enough to justify the capital expenditure involved in a joint venture without some assurance of having a market. Denmark has shown the way, vetting Ukrainian firms, expediting administrative approvals through dedicated legislation, and directly funding procurement contracts—thereby creating a level of regulatory and financial certainty where others have offered only political declarations.
Fire Point, the Ukrainian firm that makes the FP-5 Flamingo, has been an early beneficiary of this process, with rocket fuel production set to come online in Denmark in 2026. Other European countries have found similar success. In Germany, for example, the technology company Quantum Systems is co-producing Ukrainian drones. And in the United Kingdom, the Ukrainian firm Ukrspecsystems is opening a drone factory in Suffolk.
The continent can better incorporate Ukrainian expertise into NATO training.
In Ukraine, the government must address problems with the country’s business environment that stand in the way of progress. Ukrainian companies, particularly the younger startups, have driven significant battlefield innovations, but they are worried about losing their intellectual property. These startups lack the resources and experience to navigate cross-border regulations and fear that sharing their knowledge with foreign partners means losing their competitive edge. Ukraine ought to harmonize its legal frameworks governing technology transfers with the EU, reducing the legal uncertainty that currently deters both sides from entering partnerships.
The Kyiv government and industry groups can also educate Ukrainian firms about the contractual protections already available to them under existing Ukrainian law and international arbitration frameworks to persuade them to seek out mutually beneficial deals with European firms. Finally, Kyiv should assuage the legitimate concerns of European firms that struggle to conduct basic due diligence in Ukraine and fret about the reliability of financial accounts and opaque ownership structures. If the government invested in helping Ukrainian enterprises standardize their financial planning and governance structures, European investors would find it easier to verify financing, ownership, and legal compliance.
European armed forces, meanwhile, need to boost their procurement of drones and unmanned systems. Most militaries still treat them as specialized assets rather than expendable munitions; that means procurement decisions lag behind operational realities, and companies cannot count on the steady demand that would justify investment in joint production. If militaries start treating these unmanned systems as standard infantry tools, placing consistent procurement orders and integrating drones into regular training, companies will respond by ramping up production and seeking joint ventures to harness innovation and reduce costs. European governments can encourage innovation, too, by adopting a model based on Ukraine’s Brave1—a defense tech cluster led by the government that matches companies with investors and provides grants to startups. They can also embed liaisons in Ukraine’s frontline R & D ecosystem to learn about modern drone and air defense tactics and invite Ukrainian counterparts into their own defense industries to share NATO’s best practices.
The continent can better incorporate Ukrainian expertise into NATO training, too. The Joint Analysis Training and Education Center in Poland—the alliance’s dedicated hub for applying lessons from the Ukraine war, is hobbled by restrictions on information-sharing. Ukrainian senior officers should be embedded in joint exercises as participants, not just as observers, which will require loosening the classification rules that currently prevent a proper exchange of information between NATO and Ukraine and impede interoperability.
Europe has spent billions of euros on Ukraine, and leaders are right to describe the expenditure as an investment in their own security. But the returns on that investment could be greatly improved if European and Ukrainian governments did more to bridge the gap between defense ambitions and commercial reality. To that aim, they should remove regulatory hurdles, make joint ventures less financially risky, and let the private sector do the rest. The result will be a more capable European defense industry, a better-financed Ukrainian one, and a continent that is less dependent on the United States to deter future Russian aggression.
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