Ukraine opens arms exports, 20 to 30% to the defense fund

Introduction: what Kyiv just changed for good

A long-awaited mechanism finally approved

On July 1, 2026, the Ukrainian government approved what Prime Minister Yuliia Svyrydenko called the first transparent mechanism for the export of arms and defensetechnologies produced in Ukraine, according to Reuters. This legalframework, in preparation for nearly two years according to Tectonic Defense, turns an informal wartime arrangement into a structured system with published rules, fixed processing deadlines and clearly defined revenue-sharing terms.

Svyrydenko specified on X that the system would take 20% of revenue from finished defense products and 30% from components, funds that will feed a special state defense fund meant to strengthen production capacity and further develop Ukraine's defense sector.

A sentence that sums up the whole doctrine

"Every export contract must serve a strategic purpose: strengthening Ukraine's defense industrial base and delivering more weapons to our armed forces," Svyrydenko wrote. This sentence captures the spirit of the mechanism: it is not about opening a conventional arms market, but about turning Ukraine's defensive war into a funding source for its own industrial survival.

Defense Minister Mykhailo Fedorov confirmed on Telegram that countries participating in the "Drone Deal"framework will now be able to buy Ukrainian weapons and technologies directly from domestic manufacturers, bypassing the slower government channels usually required.

The Drone Deal framework, foundation of the system

27 countries already on board

This new export mechanism builds on the "Drone Deal"framework, which President Volodymyr Zelensky announced on June 18, 2026 as bringing together 27 partner countries, including 15 NATO members and 12 non-member states, according to Interfax-Ukraine. This partnership format involves exchanging proven combat experience, technologies and drones for financing, scarce raw materials or assistance in the energy and air defense sectors.

Only countries that already have intergovernmental agreements under the Drone Deal framework are eligible for this new direct export mechanism, Ukrinform notes, which explicitly rules out any market open to any interested buyer.

Six deals already signed, twenty countries in talks

According to Mezha.net, six deals have already been signed under the Drone Deal format, while more than twenty other countries are actively working to join the model. A "Fast Track" decree has also been adopted to reduce the review time for non-critical export requests from 90 to 30 days, considerably speeding up the administrative process.

This administrative acceleration notably reflects a clear political will to quickly capitalize on growing international demand for Ukrainian technology, forged and tested under the most demanding wartime conditions Europe has seen in decades.

The safeguards protecting the war effort

Ukraine's military priority remains absolute

Fedorov was explicit on this point: "Exports will only be authorized if the needs of the Ukrainian army are fully guaranteed. If the state needs a particular defense product, export authorization can be denied." This central clause, however, ensures the new mechanism will never compromise the supply of Ukrainian forces engaged at the front.

At the same time, manufacturers will be allowed to export their products if they can guarantee the simultaneous fulfillment of government contracts and export orders, a dual constraint that protects the war effort while opening a new revenue source for Ukraine's defense industry.

A list of critical products excluded from any sale

The Ministry of Defense maintains a list of "critical products" entirely excluded from export, regardless of the potential buyer. Neither Jane's nor other specialized outlets have published the precise content of this list, but its very existence signals that Ukraine's most sensitive or strategically important systems will stay off the market, shielded from any outside sale.

This methodical caution illustrates the delicate balance Kyiv is trying to maintain: opening its industry enough to generate significant revenue, without ever compromising the critical operational capabilities its own defense depends on against the ongoing Russian invasion.

The precise figures behind the new mechanism

A contract threshold and a fixed deadline

The mechanism applies to transfers worth at least 15 million hryvnias, or roughly 335,000 US dollars, a threshold that filters out minor or informal purchases to steer the system toward institutional buyers, allied defense ministries and their prime contractors, rather than individual users.

Once a partner country submits an export request, Ukrainian authorities have 30 days to process it, down from the previous 90 days for non-critical goods, according to ZBROYA, the official portal of Ukraine's Ministry of Defense.

No transfer of intellectual property

According to reports from FlightGlobal and Ukrinform, transfers made under this mechanism include no transfer of the underlying intellectual property rights: buyers obtain the equipment and its associated technology, but never ownership of the Ukrainian design know-how itself.

This clause protects the lasting competitive edge of Ukrainian industry, indeed ensuring that even in the event of large-scale technology sales, the core of the innovation remains the exclusive property of the Ukrainian designers who developed it under enemy fire.

The re-export clause, a strategic lock

Mandatory written consent

If a partner country wishes to transfer Ukrainian-origin technology to a third country, it must first obtain explicit written consent from Kyiv. This clause prevents any uncontrolled spread of Ukrainian technologies to unapproved actors, including potentially states with ties to Russia.

This control mechanism, therefore, ensures Ukraine retains permanent oversight over the final destination of its technologies, even after their initial sale to a trusted partner, a level of control rarely seen in conventional international arms trade agreements.

A 20% levy on any re-export

If such a re-export takes place, 20% of the value of the re-exported product must be paid back to the Ukrainian state budget. This provision turns every secondary transfer into an additional revenue source for Kyiv, ensuring the economic value of its innovation continues to benefit Ukraine even as it circulates beyond the first direct buyer.

This cascading levy architecture, moreover, reflects remarkable legal and economic sophistication for a country that has been at active war for more than four years, demonstrating an administrative capacity few would have anticipated in such an intense and prolonged conflict.

Zelensky and the political origin of the decision

A promise made back in April 2026

President Volodymyr Zelensky had already announced on April 28, 2026, according to Ukrainska Pravda, that Ukrainian arms exports would become a reality, specifying that the National Security and Defense Council would coordinate export processes to ensure the needs of Ukraine's defense forces are met first, with only surplus weapons to be exported.

Zelensky had framed this announcement in unambiguous terms: "Ukrainian companies will get a real opportunity to enter partner countries' markets, on the condition that our army has the right to receive the necessary volume of weapons first, only what companies can produce beyond the state order will be exported."

A partial and conditional lifting of the ban

According to Breaking Defense, this announcement already represented, back in April, a partial lifting of the ban on exporting weapons produced in Ukraine, but limited to countries deemed non-cooperative with Russia, a distinction that Ukraine's Ministry of Foreign Affairs, working with intelligence services, was tasked with determining precisely.

This double condition, non-cooperation with Russia and compliance with Drone Deal agreements, notably illustrates the geopolitical caution that continues to guide every step of the gradual opening of Ukraine's defense industry to international markets.

Phantom Defence and the companies already mobilized

Manufacturers ready to seize the opportunity

According to UASFeed, companies like Phantom Defence are already among the Ukrainian manufacturers ready to sell directly to the 27 Drone Deal partner countries, rather than routing their requests through slower government channels. This direct-sale capability, indeed, considerably speeds up the commercial cycle for companies that have developed unique expertise during the war.

These companies, often born or considerably grown since the start of the full-scale Russian invasion, embody the rapid transformation of Ukraine's industrial ecosystem, which in four years has gone from a limited industrial base to a cutting-edge technology sector internationally recognized for its drone innovation.

Production that now exceeds domestic needs

According to The Defense Post, Ukraine is opening these exports because its defense industry has developed production capacity that now exceeds the country's own needs, a remarkable reversal for a nation that, just four years ago, depended almost entirely on Western deliveries to equip its armed forces.

This surplus capacity, rather than being seen as a luxury, is therefore presented by the Ukrainian government as a strategic opportunity to directly fund the strengthening of its own defense industrial base, creating a virtuous circle between production, export and reinvestment.

What this means for future Western aid

A shift toward partial financial autonomy

This export mechanism does not replace the continued Western military aid Ukraine still needs to repel the Russian invasion, but it introduces a complementary funding source that could, over time, reduce Kyiv's exclusive reliance on aid budgets voted by Western parliaments, often subject to the vagaries of electoral cycles and domestic politics.

This diversification of Ukraine's defense industry funding sources could, moreover, prove strategically valuable at a time when uncertainty persists over the long-term commitment of certain Western partners, notably the United States under the Trump administration.

A model that could inspire other reforms

This mechanism could also serve as a model for other structural reforms within Ukraine's war economy, illustrating an administrative and legal innovation capacity that contrasts with the sometimes widespread image of a warring state necessarily paralyzed by the daily urgency of conflict.

This institutional innovation capacity, in the middle of a war, deserves to be highlighted as an indicator of resilience that goes well beyond the purely military sphere to touch the country's broader economic and industrial governance.

The risks and limits of the new system

A bureaucracy that could slow things down despite good intentions

Despite the announced acceleration in processing times, some observers question whether the Ukrainian administration, already stretched by the daily management of the war, can effectively handle a potentially growing volume of export requests within the announced 30-day deadline.

This concern, while legitimate, must however be weighed against the Ukrainian government's clear political will to make this system work quickly, as shown by the adoption of the "Fast Track" decree specifically designed to avoid administrative bottlenecks that could discourage international partners.

The risk of diversion to unwanted actors

Despite the legal safeguards in place, including the ban on re-export without written consent, some security experts point to the residual risk that Ukrainian technologies could end up, through indirect routes, in hostile hands, a risk inherent to any export of sensitive military technology, regardless of country of origin.

This risk, documented throughout the history of the international arms trade, notably justifies the methodical caution with which Kyiv has built this mechanism, favoring strict control over rapid, unregulated commercial opening.

Comparison with other wartime defense industries

A rare historical precedent

Few nations in modern history have developed a significant arms export industry while themselves engaged in an active existential conflict on their own territory. This situation places Ukraine in an almost unique category, where the necessity of survival has paradoxically accelerated industrial innovation that now exceeds its own immediate needs.

This dynamic recalls, to a lesser extent, the rapid industrial transformation observed in other nations facing prolonged existential threats, though the Ukrainian context remains distinct given the scale of international support received and the specific nature of the drone warfare that has largely defined this conflict.

An industry forged by necessity rather than planning

Unlike many Westerndefense industries developed over decades of strategic planning in relative peacetime, Ukraine's drone and defense technology industry developed under absolute urgency, under bombardment, with innovation cycles accelerated by the immediate necessity of survival on the battlefield.

This particular origin gives Ukrainian technology an operational credibility that few Western competitors can claim with the same legitimacy, having been tested and refined under the most demanding combat conditions rather than in laboratories or simulated exercises.

Negotiations underway with Washington

A Drone Deal agreement with the United States still to be finalized

According to Reuters, Ukraine is also seeking to conclude a Drone Deal agreement with the United States, a negotiation that, if successful, would represent a major additional acknowledgment of the strategic and commercial value of Ukrainian defense technology by the largest Western militarypower.

This negotiation with Washington takes place against a broader backdrop of sometimes tense relations between Kyiv and the Trump administration over continued military support, making any progress toward a mutually beneficial commercial agreement in the defense field all the more significant.

A signal of mutual trust despite political tensions

That a Drone Deal agreement with the United States could materialize despite occasional political tensions between Kyiv and Washington would illustrate the intrinsic value of Ukrainian technology, attractive enough to transcend momentary diplomatic ups and downs and rest on durable strategic and commercial interests on both sides.

This dynamic could also strengthen Ukraine's position in its broader negotiations with Washington on other matters, defense technology becoming an additional diplomatic lever in a bilateral relationship otherwise marked by a degree of unpredictability.

The potential impact on Ukraine's war economy

A new revenue stream unrelated to international aid

This export mechanism gives Kyiv a new revenue stream not dependent on international aid, a funding source generated directly by an industry Ukraine built almost entirely under enemy fire. This kind of autonomous revenue could gradually strengthen the budgetary resilience of the Ukrainian state as the conflict enters its fifth year.

This partial financial autonomy, while not replacing indispensable direct military aid, contributes to a broader transformation of Ukraine's economic posture, moving from near-total dependence on outside aid toward a hybrid model combining international support with its own industrial revenue.

Direct reinvestment in production capacity

Funds collected through this mechanism will be directly reinvested in strengthening the production capacity of Ukraine's defense industry, creating a virtuous circle in which every export contributes to increasing Ukraine's future capacity to equip its own armed forces, beyond the immediate financial benefit alone.

This reinvestment loop illustrates the strategic coherence of the entire mechanism: every dollar generated by exports ultimately serves to strengthen Ukraine's ability to defend itself, rather than being diverted to other budget priorities unrelated to the war effort.

What Western allies should take away from this

A lesson in industrial adaptability in wartime

Ukraine's Western partners, facing their own rearmament and modernization challenges for their defense industrial bases, could draw valuable lessons from the speed with which Ukrainian industry has managed to adapt, innovate and now market its technologies, despite the most unfavorable conditions imaginable.

This rapid adaptability often contrasts with the bureaucratic slowness that characterizes many traditional Western weapons programs, hampered by complex acquisition processes and development cycles sometimes spanning decades before reaching operational capability.

A partnership that benefits both sides

Easier access for Western countries to combat-tested Ukrainian technologies, via this new export mechanism, could significantly accelerate the modernization of their own air defense and drone warfare capabilities, an area where Ukrainian expertise now surpasses that of many older Western armies less versed in this specific type of conflict.

This two-way transfer of expertise illustrates the genuinely reciprocal nature of the partnership built between Ukraine and its Western allies over the course of this war, moving well beyond the one-sided assistance relationship of the conflict's early years.

The Israeli precedent and the South Korean example

Two models of defense industries born of threat

The Israeli example, whose defense industry historically developed in response to a permanent existential threat, offers an instructive parallel for understanding Ukraine's current trajectory. South Korea, facing the North Korean threat for decades, has also turned its defensive necessity into a globally recognized arms export industry.

Both precedents suggest Ukraine could follow a similar trajectory over the longer term, turning an industry born of absolute necessity into a durable economic sector that will survive well beyond the eventual end of the current conflict with Russia.

One major difference: the war is still active

Unlike Israel and South Korea, which developed their export industries in contexts of low-intensity conflict or deterrence rather than continuous active war, Ukraine is building this model even as it fights a full-scale invasion on a daily basis, a circumstance that makes its administrative success all the more remarkable.

This major contextual difference also explains why the Ukrainian mechanism includes such strict safeguards, unlike the Israeli and South Korean models, which were able to evolve gradually over several decades without the pressure of daily kinetic conflict on their own soil.

Conclusion: selling to survive, an equation openly embraced

A decision that is not unanimous but is asserting itself

This new Ukrainian arms export mechanism, with its 20 to 30% levies to the state defense fund, its strict safeguards on critical products and its sophisticated legal architecture, reflects a Ukraine that refuses to limit itself to the role of passive beneficiary of Western aid, actively choosing to turn its industrial resilience into a lasting strategic and financial advantage.

Whether this mechanism fully achieves its financial goals remains to be seen in the months ahead, but its very existence, approved in the middle of an active war, testifies to an institutional and industrial capacity that contradicts any simplistic image of a country defined only by its vulnerability to Russian aggression.

A moral and strategic equation embraced without hesitation

Selling what keeps it alive is, for Ukraine, another way to finance its own survival and strengthen its long-term ability to defend itself, a moral and strategic equation that Kyiv openly embraces, without trying to hide it behind watered-down diplomatic language.

By Maxime Marquette, columnist

Columnist's transparency note

My acknowledged biases

I sign this open letter as a columnist standing alongside Ukraine against Russian aggression. I view this Ukrainian industrial and commercial innovation capacity, in the middle of a war, as a display of resilience that deserves to be praised without reservation, and I unambiguously support Kyiv's right to fund its defense by every legitimate means available.

What I do not know

I do not have the precise content of the list of critical products excluded from export, nor the full details of ongoing negotiations with Washington on a possible American Drone Deal agreement. This analysis relies exclusively on official statements and verifiable journalistic sources, with no invention or speculation presented as established fact.

Sources

Primary sources

Ministry of Defense of Ukraine — official site

Reuters — Ukraine announces framework for wartime arms exports, July 1, 2026

Army Inform — Ukrainian defense news

Secondary sources

Ukraine's Arms Monitor — Arms Trends in Ukraine, June 29 to July 5, 2026

EFE — Ukraine drone weapons exports, July 3, 2026

Foreign Policy — geopolitical analysis