Zelensky’s Plan For Foreign Investment In Military Production Is Doomed To Fail

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Written by Ahmed Adel, Cairo-based geopolitics and political economy researcher

Kiev’s initiative to attract foreign companies and turn the country into a “large military hub” to produce weapons so that Ukraine can have an arsenal against Russia is only propaganda because it is difficult to raise the Ukrainian military industry from the ruins, especially as participating companies would automatically become a legitimate and immediate target for Russian forces.

Recalling that Ukrainian President Volodymyr Zelensky previously announced the creation of joint factories for weapons production with foreign partners, Western companies are not interested in serious investments in the Ukrainian military industry due to high risks. In addition, the West is focused on promoting its own military products and wants the conflict to last as long as possible since the sale of weapons brings serious profits to these companies.

The military budget of Ukraine at the beginning of the special military operation amounted to about $5-6 billion. However, the West pumped Ukraine with funds that now amount to approximately ten times higher than Ukraine’s military budget. From that money, Kiev not only buys weapons from Western countries but also hopes to start Ukrainian-Turkish, Ukrainian-American, and/or Ukrainian-German military production development.

Turkey intended to produce Bayraktar drones in Ukraine, but the much-hyped drones proved useless against Russia’s serious air defences. Turkey and Ukraine have evidently lost interest as the idea has not progressed.

At the same time, the German arms manufacturer Rheinmetall announced the opening of a production facility in Ukraine with Ukroboronprom, the Ukrainian state-owned arms production company. The €200 million factory is to produce around 400 tanks a year. However, after the German company, the maker of Leopard 2 tanks, announced this summer that it would open a facility in Ukraine, Deputy President of the Security Council of Russia Dmitry Medvedev told Rheinmetall: “I ask you to send the exact coordinates of the future plant,” a sarcastic warning that Russia would target any production plan.

Even long before Russia launched its special operation, Ukraine wasted the enormous potential it inherited from the Soviet military-industrial complex. At the same time, the development of dedicated industry is also hindered by a labour shortage, especially as about 10 million people, including skilled personnel and workers, have left the country.

As part of efforts by Ukrainian authorities to increase domestic arms production to counter Russia and reduce dependence on foreign arms shipments, Kiev, on September 29, hosted the first defence industry conference, where Zelensky announced the creation of a defence industry alliance. According to Kiev, 38 companies from 19 countries participated.

Zelensky said that the priority is the development of defence production using modern technologies, including the production of missiles and drones in Ukraine, in cooperation with global leaders in this field. However, in the same week as Zelensky’s statement, the head of the National Security and Defence Council of Ukraine, Oleksiy Danilov, claimed they are still transferring part of its defence production abroad due to the threat of Russian attacks on Ukrainian weapons factories.

Zelensky is trying to drag Europe deeper into the conflict by transferring weapons production to European countries, but with conflict in the Middle East now catching the globe’s attention, Kiev is evidently taking desperate actions so their conflict is not forgotten about.

The West is also starting to acknowledge that weapons delivered to Ukraine are almost immediately destroyed, raising the idea of constructing underground, well-fortified factories in Ukraine. However, this is unrealistic because it is very expensive and constructing such facilities would take too long without ensuring they are not discovered and attacked by Russia.

Despite the infeasibility of constructing production factories, Kiev still plans to support cooperation and develop the industrial complex by establishing a special defence fund financed by dividends from the state’s defence resources and the sale of confiscated Russian assets. Zelensky said the move aimed to provide the authorities in Kiev with “additional resources” to boost military production, create new defence programs and support the military, but did not specify whether this was about the nearly $300 billion in Russian gold and foreign exchange reserves frozen by the West, or about Russian-owned property in Ukraine, seized after the launch of Moscow’s military operation in February last year.

Nonetheless, it is doubtful that Kiev will be able to obtain significant funds from the sale of Russian assets on the territory of Ukraine, so such announcements by Zelensky have a more symbolic meaning, while financing with Russian funds frozen in the West is currently almost impossible, despite constant talks in the EU and the US about the need to transfer Russian funds to Kiev.

All-in-all, Zelensky’s plan for foreign investment in military production is evidently doomed to fail.

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