How Ukraine miltech exports will spur post-war reconstruction

BLUF: Ukraine’s 900+ defense companies could bring in up to 20 billion per year, comprising a significant portion of Ukraine’s post-war economic revitalization. But, that’s only if the government gets taxes/export rules/brain drain right, and the industry make long-term deals with foreign partners and secures appropriate financing.

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Ukraine's reconstruction will take place alongside a predicted post-war economic boom, but will depend on such factors as:

The country now has over 900 defense companies (before the full-scale invasion there were only about 50), with export potential that can bring in about $15-20 billion per year and boost GDP by more than 10 percent, according to industry representatives. Many companies can also pivot production towards civilian uses and markets, providing another avenue for growth. 

Predictions are based on a steady expansion of the economy over the past two years. Ukraine's economy grew by nearly 4 percent in 2024, with a third of this growth provided by the defense industry. The economy is projected to grow by 1.9 percent in 2025 and by 2 percent in 2026, per the National Bank of Ukraine

Approximately 100 state-owned and 800 private defense enterprises were operating in Ukraine this year, Defense Minister Denys Shmyhal said last month.

Joint production projects in Ukraine and abroad have also been launched in 2025. Twenty five foreign companies are setting up factories in Ukraine to produce various types of equipment, from traditional artillery to AI-powered unmanned systems.

In order to stimulate the industry’s growth, the state provided 80 preferential loans to companies for almost $119 million, and 16 more (worth $16.6 million) are approved for disbursement. 

Additionally, many Ukrainian defense manufacturers said they are ready or preparing to export weapons – just as Ukraine’s government has signaled a willingness to relax export control measures.

In 2024, Ukrainian defense production was estimated at approximately $9-10 billion (production of equipment and components). 

In the future, revenue could increase to more than $15-20 billion per year over the next decade, mainly through exports, according to Stanislav Hryshyn, co-founder of General Cherry, a drone maker.

To achieve such numbers, companies need to enhance cooperation with one another, increase production, and take advantage of foreign financial models, such as the Danish one, he told The Arsenal. The ‘Danish model’ is a unique mechanism for providing direct support to Ukraine’s defense industry. 

On top of that, the industry will also have to adjust to new post-war realities. The military-industrial complex will have to transition from crisis mode to stable operations after the war ends, especially considering that military expenses will go down, said Ihor Fedirko, CEO of the Ukrainian Council of Defence Industry, a coalition of 270 manufacturers. 

Even with a drop in military expenses, the defense industry will bring Ukraine billions of dollars in annual revenue, Fedirko said. This will be driven in part through its capacity to provide approximately $2 billion per year in exports. 

That would boost GDP by several percentage points, he predicted, because most products will be manufactured inside Ukraine, creating jobs and orders for other industries, like logistics, IT, and research institutions.

In the future, Ukrainian companies will receive long-term state contracts and be able to plan production years ahead, said Fedirko. The Ministry of Defense will order not only finished products but also modernization, repair, and implementation services for the Armed Forces.

Fedir Venislavskyi, a member of the Verkhovna Rada’s Committee on National Security, Defence and Intelligence, offered similar predictions. 

He said Ukraine will be able to produce advanced military products for its own needs and for export for at least a decade after the end of the war. 

State enterprises will ensure large-scale production of missiles, armored vehicles, ammunition, and other products, while private companies will supply niche products like drones, electronic warfare systems, and electronics, predicted Hryshyn of General Cherry.

Even with predictions of rapid growth, the industry should brace for plenty of challenges, said Hryshyn, who cited the economic expansion seen after World War II as a sign that Ukraine has promising prospects. 

He said the nuances of tax policy also need to be considered for any predictions about future growth: the industry is asking for lower tax rates and incentives for companies, as well as special regimes for export projects.

There are certain steps that can be taken now to strengthen the industry’s chance at expansion. Ukrainian companies are producing more than they can sell to the military or abroad, Volodymyr Zinovskyi, Deputy CEO at TAF Industries, a drone and EW maker, told The Arsenal. Some production lines will have to be reoriented to dual-use solutions, such as drones, communication systems, batteries, or composite materials for civilian industry.

Dual-use technologies will improve logistics, energy, agriculture, and environmental monitoring, automate many processes, and strengthen enterprise security, Fedirko said.

The Ukrainian government needs to attract investments and conclude export contracts now, said Hryshyn. 

Localization is also facing bureaucratic issues that need to be addressed, he said. For example, German defense giant Rheinmetall has delayed an ammunition factory they planned to build in Ukraine due to concerns about its location, the company’s CEO said.

The defense industry is a promising sector through which regions affected by the war can be reconstructed, with the creation of new factories driving revitalization of business, Anton Semenov, CEO of CYBER SQUAD LLC, a private cyber defense agency, told The Arsenal. 

This will require training and requalification of personnel, especially in engineering, IT, and artificial intelligence. Every dollar invested in digital defense technologies can generate $4 to $6 in added value through the development of related industries such as education, energy, telecommunications, logistics, cyber services, said Semenov.

Ukraine’s plans to resume the controlled export of military products – opening up a new world of opportunities. The first contracts are expected with the EU, the US, and the Middle East in the second half of 2026.

The idea is for surplus products to be sold abroad after Ukraine’s own domestic needs are first met. It’s unclear right now how much of a surplus will exist in 2026, but the National Security and Defense Council (NSDC) has said production capacity could reach $60 billion in 2026. 

Exports can potentially bring the state $3-5 billion per year in the medium term if industry development is combined with NATO-standard product certification,  joint production in Europe, and tax incentives for R&D, said Semenov. 

The money from sales could help with financing Ukraine's reconstruction.

Launching exports will not be easy, however. Ukraine will face competition with other players on the weapons market, Oleksandr Bakhmach, CTO of Dwarf Engineering,  told The Arsenal. 

He said there are also two major risks for post-war Ukraine: 

Ukraine will primarily sell unmanned systems – aerial, ground, and maritime, according to the NSDC. To strengthen export potential, joint projects are already being created within the Danish model, as part of the Build in Ukraine and Build with Ukraine initiatives.

After the war, the global military technology market will also have undergone quite a makeover, with significantly more unmanned systems, electronic warfare, and "smart" weapons than there were before 2022. These will be crucial for any state that cares about its security, Fedirko said.

According to Fedirko, Western partners are most interested in the following Ukrainian technologies:

Europe has already suffered hybrid attacks, navigation disruptions, and drones flying over airports (read our deep dive on that issue here). And Ukraine has proven that its technologies work in practice to counter such threats. The most attractive markets for Ukraine include countries looking to bulk up their technological defenses for such threats from Russia in the future, including:

The Ukrainian government is creating a platform called ‘Build with Ukraine,’ changing the sector’s legislative framework, and creating incentives for manufacturers, said Ihor Matviuk, director of AERO CENTER DRONES, a manufacturer of unmanned aviation systems and ammunition. 

Companies are also launching certification and codification processes for products according to the requirements of international customers, seeking foreign partners, and creating joint ventures.

Officials plan to introduce tax and customs clearance incentives, and prevent unnecessary checks that would slow down the process. 

Main areas of preparation:

Challenges to consider: