- Arms industries could drive Ukraine’s postwar economic recovery, its former foreign minister told BI.
- Dmytro Kuleba said Ukraine could tap into military tech and utilize it in its private sector.
- Ukraine could face new challenges whenever the war ends, stifling economic growth.
Defense industries could be the driving force behind Ukraine’s postwar economic recovery, the country’s former foreign minister told Business Insider in an interview.
Dmytro Kuleba, who led Ukraine’s foreign ministry from 2020 to late 2024, said, “When I look at defense industries, I think of how to turn them into a driving force of Ukraine’s economic revival.
“What we see today is a complete restructuring of Ukraine’s economy,” he added.
No one knows when the war in Ukraine will end, although conversations over a peace deal are taking place between President Donald Trump and Russia’s President Vladimir Putin.
Ukraine’s economy has struggled since Russia launched its full-scale invasion in February 2022.
According to its statistics agency, Ukraine’s GDP fell by 28.8% in 2022, before rebounding 5.3% in 2023. Its GDP growth was projected to be about 3.4% to 3.6% in 2024, due in part to defense spending, per the OECD.
Even so, Ukraine’s economy has proved resilient, thanks in part to more than $220 billion in Western military aid and to its private and state-run companies shifting their focus toward the country’s defense industry.
“Today, a different economy is emerging in front of us,” Kuleba told BI, one where he said the private sector could also “massively” leverage Ukraine’s defense technologies, such as AI-piloted drones and autonomous vehicles used on the front lines.
“Why cannot the same technology be applied to analyzing the economy, the movement of goods and services in the country, and optimizing them to make them more cost-efficient and customer-oriented?” he said.
Arsenal of the Free World
Kuleba is not the only former official who sees huge potential in Ukraine’s defense industries.
Oleksandr Kamyshin, Ukraine’s former minister of strategic industries, told The Guardian in November 2023 that Ukraine could become the “arsenal of the free world.”
Some economic and military analysts have also predicted that Ukraine will become a European defense powerhouse after the war ends.
William Courtney, an adjunct senior fellow at RAND Corporation and a former US ambassador, told BI that Ukraine could become a cost-competitive producer of a wide range of military equipment.
This would be useful given that many European countries lack the capability to produce some items or the capacity to produce them in sufficient volume, he said.
Courtney pointed to software, AI, robotics, and wheeled vehicles as key areas Ukraine has developed since the start of the war, and where it could lead in Europe.
He also said that a decade after combat operations end and a stable cease-fire or armistice is achieved, Ukraine could become one of the world’s top 10 countries in terms of defense production.
Dmytro Krukovets, a macroeconomic analyst at the Kyiv School of Economics, told BI he expects Ukraine to be a strong player after the war.
He pointed to a “rapid rise” in military-tech startups and defense innovations, citing an October 2024 study by Brave1 and the Kyiv School of Economics.
That study found that Ukrainian defense startups raised $5 million in 2023, and looked set to raise $50 million in 2024.
Not plain sailing
However, other economic analysts struck a more cautious tone.
Kateryna Bondar, a fellow with the Wadhwani AI Center at the Center for Strategic and International Studies, told BI that Ukraine will struggle to attract foreign investment due to its weak judicial system and lack of legislation to protect intellectual property rights.
“Capital can come only from abroad,” she said, “but we haven’t seen really considerable investment, and the reason for that is really the absence of trust in the government, in legislation, and in the judicial system.”
Since the outbreak of the war, Western defense companies have opened facilities in the country, including German arms maker Rheinmetall, American defense contractor AeroVironment, and KNDS, a French-German defense group.
But Charles Lichfield, deputy director of the Atlantic Council’s GeoEconomics Center, told BI that Ukraine will also need its defense industries to serve domestic needs, to deter future attacks, limiting export opportunities.
“They’ll need to keep a lot of what they’re producing,” he said.
RAND researchers said in a 2023 report that Ukraine would need security guarantees against the threat of another attack to give investors the confidence to take risks and make long-term commitments in the country.
For now, Kuleba, the Ukrainian minister, said his ideas for Ukraine’s economy are still uncharted territory, but that “if we want to build a future, we have to start” now.
He added: “Ukraine is open to virtually any idea that can boost economic growth and build a sustainable economy.”
