Defense Valley: How Ukraine Can Become a Security Producer for Itself and Europe

At the Defense Industry Forum in the Netherlands earlier this summer, European Commission President Ursula von der Leyen voiced her admiration for Ukraine’s rapid defense innovation:

“I am deeply impressed by how Ukraine, which is fighting a war for survival, has developed a defense industry, drones and ballistic missiles from scratch.”

Her sentiment reflects a growing recognition in Europe — particularly among Scandinavian countries — of Ukraine’s role as not only a defense consumer but also a defense producer. In recent months, the list of interested partners has expanded to include Germany and France, both of which have announced new cooperative ventures with Ukraine’s defense sector.

Defense Industry: A Key Growth Engine

Ukraine’s defense industrial complex (DIC) has become a critical pillar of the economy. In 2024, the country’s GDP grew by nearly 4%, with one-third of that growth coming directly from the defense industry, according to then-Minister of Strategic Industries German Smetanin.

Production figures tell the story:

• 2022: ~$1 billion worth of weapons and military equipment produced.

• 2024: ~$10 billion — a tenfold increase in just two years.

“In two years, weapons production has increased tenfold,” notes Oleksiy Dorohan, Executive Director of the BRDO, calling this growth unprecedented.

From War-Driven Demand to Lasting Industry

While Ukraine’s defense production boom has been fueled by the urgent needs of war, experts stress its potential for long-term strategic benefit:

• Domestic security: Sustaining high-level production ensures continued supply for Ukraine’s armed forces.

• Export potential: Partnership agreements with NATO countries could position Ukraine as a supplier for European defense needs.

• Innovation leadership: Rapid development of drones, ballistic missiles, and advanced technologies offers competitive advantages on the global market.

Strategic Shift for Europe

As NATO members debate increasing defense spending to 5% of GDP, Ukraine already leads the world in military expenditure-to-GDP ratio. For Europe, partnering with Ukraine could mean:

• Access to battle-tested technologies.

• Increased production capacity without overburdening domestic facilities.

• Strengthened collective security architecture in the face of evolving threats.

Ukraine’s defense industry — born out of necessity and paid for in immense sacrifice — is now poised to evolve into a “Defense Valley”: a hub of security innovation and production that can serve both national and European interests.

If you want, I can prepare a follow-up article outlining specific investment opportunities and partnership models for foreign defense companies looking to enter Ukraine’s market. That would make this piece more actionable for investor audiences.