KYIV, Feb 20 (Reuters) – Ukraine could export several billion dollars worth of military goods and services this year after authorizing its first wartime foreign sales and is considering taxing those exports, a senior Ukrainian defense official said.
Earlier this month, the state commission that handles wartime-related licenses approved 40 applications from defense sector producers for the export of materials and services, David Aloyan, deputy secretary of the National Security and Defense Council in Kyiv, told Reuters in an interview.
Ukraine halted arms exports after Moscow’s February 2022 invasion and has relied heavily on arms supplies from partners to defend itself against Russian forces.
At the same time, Kiev poured resources into developing its weapons industry, especially drones and missiles. Leveraging its vast battlefield experience, Ukraine has experienced a defense technology boom in recent years.
Asked about this year’s export potential, Aloyan said: “Taking into account ready-made products, spare parts, components, and services that can be provided, it will reach several billion dollars.”
Overall, the potential is “significantly higher” than pre-war exports, he said.
But Aloyan, who is a member of the Commission on Export Authorization, rejected talk of an immediate export boom for arms manufacturers and developers.
Ukraine’s own military needs must come first, he said, as Russian forces advance in the east of the country and airstrikes hit towns and cities far from the front lines.
US-brokered peace talks have stalled over Russian demands for regional concessions.
foreign interest
Ukraine’s allies have shown interest in acquiring its cutting-edge defense technology, Aloyan said, naming Germany, Britain, the US, the Nordic countries, three Middle Eastern nations, and at least one Asian country as among those interested.
One of the Middle East countries with a long history of arms trade with Ukraine is looking for opportunities in drones and heavy vehicles, Aloyan said, declining to name the country.
Exports to countries that are Kiev’s strongest supporters in the war will be prioritized, Aloyan said.
Kyiv aims to prioritize joint ventures and other forms of cooperation with foreign countries to attract financial resources, create new frontline arms supply chains and access new technologies. This is more important than the simple export of ready-to-use products, Aloian added.
Defense manufacturers are pressing Ukraine to resume exports, saying it risks losing opportunities in the global arms market. Some have already created subsidiaries for overseas operations.
“There is no desire or goal to lock out all manufacturers and only have our own … There is a vision, and it is focused on creating a system that prioritizes the frontline and the national interest,” Aloyan said. “And then comes the commercial interest.”
Ukraine is also considering an export tax for defense producers, he said.
While no final decision has been made, he believes the measure will justify a decision to resume exports for the state, as Kiev can use the revenue to spend on its underfunded military needs.
None of the applications approved by the commission involved the export of ready-to-use weapons, Aloyan said, and the majority aimed to reimport weapons into Ukraine for use on the frontline.
But some are related to equipment for the Ukrainian-American FrankenSAM program, which is developing a surface-to-air missile system that combines Ukraine-owned Soviet systems with Western missiles.
(Reporting by Yulia Daisa)
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