Europe is shifting from providing weapons to Ukraine to funding its defense industry

• The EU is providing funds to help promote Ukraine’s domestic arms manufacturing industry.

• It is a strategy that makes Ukraine more self-reliant and relaxed in its own stocks.

• An expert told BI that Ukraine is a place to manufacture weapons on a large scale.

European countries are changing their strategies in Ukraine, aiming to improve the country’s ability to produce enough weapons to defend itself, rather than handing over ready-made weapons from their own exhausted stocks.

In March, the EU said half of the 2 billion euros ($2.3 billion) aid packages collected from frozen Russian assets were specifically used to help Ukraine strengthen its own artillery production, the largest gunplate to date.

This is a trend that can have a greater impact.

Military analysts told Business Insider that directing funds to develop Ukraine’s defense industry could help reduce Ukraine’s dependence on foreign military aid and strengthen Europe’s own growing defense sector.

Europe strives to produce enough shells

After decades of peace, Europe is rapidly strengthening its defense, which has exacerbated the threats in U.S. support and the threats of Russian President Vladimir Putin.

Even so, its arms industry is working to rebuild military stocks while providing Ukraine with shells and other weapons to defend against Russia.

Ukraine’s own rapidly growing defense sector offers solutions, Jacob Funk Kirkegaard, a senior fellow at the Bruger think tank, a non-resident senior fellow at the Peterson Institute for International Economics told BI.

“This is an imminent financial and economic significance for particularly wealthy Western European countries and can directly fund the full use of Ukraine’s production capacity,” he said.

Kirkegaard added that Ukraine is a much cheaper place to make weapons than Western Europe, and it already has a growing and innovative defense manufacturing industry.

He suggested re-concentrating European weapons production in Ukraine itself is a “win-win” that allows Europe to cut costs, boost vital allies, and test and refine weapons on the battlefield.

Ukraine strengthens weapons production

In the early days of the full Russian invasion, Ukraine relied heavily on weapons and ammunition from its Western allies and produced only a small percentage of the weapons needed.

But Ukrainian President Volodymyr Zelenskyy said this month that it had launched the old Soviet weapons manufacturer and now produces 40% of the weapons it used in the front.

Ukraine is now also the world leader in the development and production of cheap drones, which have become ubiquitous weapons on the battlefield.

“We have become the world’s largest drone manufacturer, tactical and strategic level drone,” Ukrainian Defense Minister Rustem Umerov said in February.

As Bi’s Jake Epstein reported, Ukrainian drone manufacturers are more than just making weapons – they are rewriting modern war rules at speed and scale few imagined a few years ago.

“As the importance of drones continues to grow, Ukraine’s share of domestic production will also rise,” Kirkgard said.

Meanwhile, European defense sectors have been working to increase production to keep demand pace, while military analysts at the Royal United Services Institute will set regulations in April and lack coordination as a factor to stop their retreat.

“Increasing output from domestic industries takes time,” Jacob Parakilas, head of European Defense Strategy, Policy and Capacity Research at Rand, told BI. “Ukrainian industry has been much mobilized and can be effectively supported in the short term through direct investment and targeted knowledge transfer.”

Parakilas said European countries will also gain significant improvements from working closer with Ukraine to jointly increase production.

“These methods can happen simultaneously and ideally have synergies,” he added. “The Ukrainian experience is to inform Europe of the understanding of art, and European funds support Ukrainian industry.”

European Defense Corporation opens shops in Ukraine

Several European defense companies, including Rheinmentall in Germany, BAE Systems in the UK and KDNS in Franco-German, have established manufacturing operations in Ukraine to manufacture military supplies including armored vehicles.

Others, such as Thales in France, have already engaged in joint ventures with Ukrainian companies.

Cooperation between Ukraine and NATO countries in arms production is growing steadily.

According to Ukrainian media reports, the state’s arms manufacturer Ukrolong Prom State has been working with an unspecified NATO country to produce ammunition since 2022. The ammunition was reportedly in line with alliance standards, further integrating NATO and Ukrainian troops.

Since 2023, Ukraine has also been working with Poland to manufacture shells and other equipment.

The latest aid package will further facilitate these efforts. “As the U.S. has increased its hubs away from European fuels, this trend is expected to accelerate in 2025,” Serhii Kuzan, chairman of the Ukrainian Center for Security and Cooperation, wrote to the Atlantic Commission in March.

Parakilas expects Ukraine to provide more support in terms of European support, which can produce more than 40% of equipment at home and enter the manufacturing of more complex weapons and technologies, which still relies heavily on its allies.

But that means the industry will become more attacked by Russia and “may require more cautious investments to generate resilient returns”, he said.

Even so, it seems that the defense sectors in Western Europe and Ukraine may move towards closer integration.

“It is unwise to distinguish the defense sectors of the EU/Europe and Ukraine over time,” Kilkgad said. “They will be one.”

Read original articles about business insiders