Ukraine has opened up arms exports – but not for all manufacturers, markets or products. What's wrong with the new mechanism?
Nothing frustrates a Ukrainian arms manufacturer quite like attending an international defence exhibition.
On the one hand, it's an opportunity to showcase their developments to the world, find new partners, hold negotiations and feel part of the global arms market. But on the other hand, even in the fifth year of the full-scale war, Ukraine's entire defence industrial base continues to live in a paradoxical reality: it can demonstrate its products, but it can't fully sell them abroad.
This problem was particularly evident in June at the Eurosatory-2026 exhibition in Paris – Europe's largest defence forum.
The scale of the exhibition was impressive. There were nearly a dozen vast pavilions filled with American, European and Asian corporations with hundred-billion-dollar budgets. Many of these companies have spent decades refining their technologies, although few of them have tested their products extensively in real combat.
Stepping into the Ukrainian pavilion was like entering a different world. The manufacturers here weren't showcasing equipment that had proven itself in wars long past. They were presenting technologies from a war that is going on right now.
Attack drones, interceptor drones, ground robotic systems, sea drones, autonomous platforms, new communication, command and reconnaissance systems – the Ukrainian displays seemed to consist almost entirely of unmanned systems, every one of which had already been tested in real combat.
There was huge interest in these developments. The Ukrainian stands were constantly surrounded by military delegations, officials, procurement specialists and representatives of foreign companies.
But it was here that the main paradox emerged.
Unlike their competitors, the Ukrainian manufacturers could demonstrate their technologies but could not sell them.
Although it was nearly a year ago that Ukrainian President Volodymyr Zelenskyy announced the opening up of arms exports, only a handful of companies have received permits. Manufacturers went through all the circles of hell in Ukrainian bureaucracy only to be met with refusal, usually without any explanation.
So the issue of exports has long been a key concern for the entire Ukrainian defence market.
Last week Ukraine's Cabinet of Ministers approved a new procedure for the export of defence-related products and presented it as the effective opening up of Ukrainian exports.
However, when the resolution was officially published on 7 July, it became clear that the new mechanism not only fails to resolve many of the existing problems, it also creates a number of new ones.
Nevertheless, many of the market participants surveyed by Ukrainska Pravda responded positively to the resolution. It's not perfect, but for the first time in years, the process of finding a workable export model has at least moved out of the doldrums.
A slow-moving Fast Track
When the government announced the opening up of arms exports, the messaging appeared somewhat optimistic.
Prime Minister Yuliia Svyrydenko and Defence Minister Mykhailo Fedorov announced that the adoption of the resolution would pave the way for Ukrainian manufacturers to enter foreign markets. It all sounded great, but there was almost no detail behind the statements.
Almost no one understood what the new mechanism would look like, who would be able to use it, and how it would differ from the existing export control system.
So on 2 July, a closed-door meeting was held between government representatives, major arms manufacturers and industry associations at the Parkovyi Exhibition and Convention Centre in Kyiv.
The lineup of attendees on each side said a lot about the situation.
Representing the manufacturers was a combination of both associations that have traditionally maintained good relations with the authorities and representatives of companies whose executives had only recently faced prison. In other words, a genuine attempt was being made to listen to a range of voices.
But the composition of the government delegation was even more telling.
Although the new export procedure had been officially developed by the Defence Ministry, Defence Minister Mykhailo Fedorov himself was not at the meeting. Nor was anyone from the ministry's senior leadership. The Ministry of Defence was represented only by the minister's adviser, Anna Hvozdiar.
However, the National Security and Defence Council (NSDC) was represented at an unexpectedly high level – its Secretary, Rustem Umierov, and his deputy, Davyd Aloian, attended the meeting. They have long been dealing with the export of Ukrainian defence technologies within the framework of the Drone Deal mechanism.
Equally unexpected was the presence of Davyd Arakhamiia, leader of the Servant of the People parliamentary faction, who effectively acted as both moderator and key speaker.
Technically, Arakhamiia has only an indirect connection to arms export policy. However, in recent years it has been an almost unwritten rule within the government that virtually any issue involving large amounts of public money sooner or later becomes part of Davyd Arakhamiia's political interests. Arms exports are no exception.
But the appearance of the leader of the president's faction – known within government for his ability to "get things going" and to reconcile seemingly irreconcilable stakeholder groups – is, in the case of exports, more of a positive. It likely provided the push needed to reconcile two different concepts that had been competing with each other in recent months.
A closer look at the new export mechanism immediately reveals that different parts of it appear to have been written by different teams. And to some extent that is the case.
In effect, a new Defence Ministry team has built the export resolution around the older idea of the Drone Deal – the concept of international partnership in the export of Ukrainian unmanned technologies.
According to Ukrainska Pravda's sources in the government and the arms market, two different visions of how Ukrainian arms exports should work have coexisted within the authorities in recent months.
The first concept was developed by NSDC Secretary Rustem Umierov's team. This is the Drone Deal – strategic partnerships between Ukraine and other countries in the field of unmanned technologies.
Originally this idea was considered to be a possible element of cooperation with the United States immediately after Donald Trump's election victory. At the time, Ukraine hoped to interest the new US administration in its own drone technology developments and to propose long-term technological cooperation.
But the White House was far more interested in dialogue with Russia than in Ukrainian drones. The situation changed after the US strikes on Iran, when Middle Eastern countries experienced an acute shortage of modern air defence systems.
In spring 2026, the Drone Deal concept returned to the agenda. The idea behind it is much broader than just arms trade.
What is effectively being proposed is a long-term security partnership. Ukraine is not simply seeking to sell drones. It is offering to help partner countries analyse their air defence systems, identify vulnerabilities, develop the necessary solutions, supply the relevant drone systems, train personnel, and later provide upgrades, servicing and ongoing technical support.
The Drone Deal, in other words, is not a contract to supply equipment, but a comprehensive intergovernmental programme requiring months – sometimes years – of negotiations.
But the Defence Ministry under Fedorov favours solutions that deliver maximum acceleration immediately rather than years down the line. When it comes to arms export reform, the views held by Fedorov's team are no different.
Thus, this issue has seen two totally different concepts collide, creating a kind of export Frankenstein which is tied to the long-term Drone Deal framework while also pursuing the Fast Track digitised export mechanism, complete with tacit law enforcement approval, digital accounts for exporters and other solutions characteristic of Fedorov's team.
The resolution is composed of two different concepts that do not always sit together organically. Some of the advantages it offers are near-revolutionary, but most of the problems with this mechanism stem from its dual nature.
What Fast track actually changes
To understand why the government needed to devise a separate Fast Track in the first place, it's worth examining how the system worked until very recently.
A manufacturer wishing to export its products must first obtain special exporter status. It then applies to the State Export Control Service, which forwards the application to the Interdepartmental Commission on Military-Technical Cooperation and Export Control Policy (IMCTC). There is also the option of contacting existing special exporters, who will assist with documentation and exports for a fee.
The decision is effectively taken by this commission, which comprises 17 representatives from 15 government bodies, including the Defence Ministry, Economy Ministry, Foreign Ministry, National Security and Defence Council, intelligence agencies, law enforcement agencies and other institutions.
Any of them can raise objections, and that alone is sufficient to halt the export licence issuance procedure. The manufacturer won't even know which body raised the objection or what the grounds for refusal were.
At the moment it can take up to 90 days for an export application to be reviewed at the IMCTC.
For the whole of that time, the company is in a state of complete uncertainty: it does not know whether it will receive approval or not. It is therefore effectively unable to conduct substantive negotiations with foreign customers or take on contractual obligations.
These are the problems the new Fast Track is intended to solve.
The first and arguably the most significant proposed innovation is to cut the time taken to review applications. Now, no more than 30 working days may elapse from application to decision.
Even if a company receives a rejection, it will have lost about one month rather than three. This means manufacturers will be able to rectify issues and reapply more quickly.
Another significant change is the removal of the IMCTC from the decision-making process for the majority of export applications. A straightforward interdepartmental approval procedure has been introduced in its place.
Ihor Fedirko, head of the Ukrainian Council of Defence Industry, one of the largest relevant defence industry associations, told Ukrainska Pravda: "Basically, now only four principal security services give their approval to the Defence Ministry – and that's it. And they don't even go through the IMCTC, but through this simplified interdepartmental clearance – letters are simply sent to all parties, everyone receives them, responds that there are no objections, and the export goes through. This is a huge relief for companies."
This not only reduces the influence of bureaucracy but also significantly speeds up document approval.
The number of parties involved in such approval has been reduced from 15 to just a few: the Ministry of Defence, Security Service of Ukraine, Foreign Intelligence Service, Defence Intelligence of Ukraine and the State Export Control Service. That's all.
Even the Economy Ministry and Foreign Ministry have been removed from the approval procedure for specific export contracts.
Another fundamental change is the "tacit consent" mechanism.
Previously, each agency was required to formally issue an opinion on export approval. If any service failed to respond to that request, the procedure could stall indefinitely.
Now a new principle applies: unless the law enforcement agencies raise objections within 15 calendar days, and the Ministry of Defence within 20 days, it will be automatically deemed that no objections exist.
This is one of the most significant innovations in the entire resolution.
It relieves manufacturers of the need to trudge from one government office to another, reminding officials that they need to provide yet another signature.
However, if a product falls under special restrictions, the application is referred to the IMCTC, where all the relevant bodies will be able to raise objections. There are two such restrictions: if the destination is a country with which no Drone Deal has been signed, and if the product appears on the list of critical technologies.
The list of countries to which products may be exported under the Fast Track will be updated every quarter by the Ministry of Foreign Affairs, while the list of critical goods and technologies will be compiled by the Ministry of Defence and also updated quarterly.
Another significant change introduced by the new procedure concerns the special exporter status itself.
Acquiring this status used to be a separate complex bureaucratic procedure requiring a specific decision by the full Cabinet of Ministers.
The logic is now different. If a company already works with the Defence Ministry, has fulfilled state contracts, and has confirmed production activity, this is sufficient to qualify it to participate in the Fast Track without obtaining special status.
The Ministry of Defence has pledged to digitise the entire export application process.
A dedicated electronic service is to be set up for exporters that will enable them to track the status of their applications in real time and see which approvals have been obtained and which are still being processed.
Eventually it will be possible for applications to be submitted entirely electronically, with no red tape or in-person visits to government offices.
The most significant innovation of all, however, concerns the role of the Defence Ministry itself.
The Defence Ministry used to be able to block exports indefinitely by citing the needs of the Armed Forces.
In practice, this frequently resulted in paradoxical situations. The Ministry of Defence would say there was a need for a particular product and therefore oppose its export – yet the ministry itself would not have the money to buy that product for the Armed Forces of Ukraine.
So the manufacturer would be trapped, unable to sell its product either to the Ukrainian state or to a foreign customer.
The new resolution proposes a different mechanism.
The Defence Ministry can still argue that a particular product is required by the Armed Forces and therefore oppose its export.
But if the Defence Ministry makes such a claim, it must back it up within a month by signing a procurement contract and actually purchasing the equipment through the relevant defence procurement agencies.
If it fails to do so, the manufacturer gains the right to request an export permit, and the ministry can no longer block the process simply by declaring that the Armed Forces need the product.
However, Ukraine's military continues to have priority under the resolution. If a manufacturer already has active contracts with the Defence Forces, those contracts must be prioritised.
If those domestic deliveries are disrupted, the Defence Ministry can seek a temporary suspension of the export permit until the domestic contracts have been fulfilled.
Taken together, these changes genuinely make the new mechanism faster, more transparent and less bureaucratic.
That's why most manufacturers initially welcomed it.
However, a closer reading of the resolution quickly revealed that alongside the new opportunities, it also creates a number of new problems.
Equal on paper, unequal in practice: Fast Track is not for everyone
The first and perhaps most obvious weakness of the new export mechanism is that it does not open up exports for the vast majority of Ukraine's defence industry. It's designed solely for manufacturers of new drone technologies.
The clearest example of this is the special export levy.
A company wishing to use the Fast Track mechanism must pay 20% of the contract value when exporting finished products or technologies and 30% when exporting components.
The government's logic is understandable. It wants to generate additional budget revenue from defence exports.
The problem is, however, that for the vast majority of traditional arms manufacturers, this economic model simply does not work.
Companies that produce armoured vehicles, artillery systems, ammunition and other conventional weapons operate in mature, highly competitive global markets where an additional 20% charge doesn't merely reduce profits – it effectively removes any commercial incentive to export.
In other words, they are left with two options: either export at a loss, or continue to use the existing export procedure through the Interdepartmental Commission under the old system.
"The issue of the levy was raised at the meeting," Serhii Honcharov, director of the National Association of Ukrainian Defence Industries (NAUDI), told Ukrainska Pravda. "On the positive side, both Davyd Arakhamiia and Rustem Umierov did say: 'This was just our first attempt at assessing the market. Now it's up to you, the industry, to tell us where we've got it wrong. Show us where we've created unnecessary bottlenecks for ourselves.'
For some products it doesn't make much difference whether the levy is 20% or 30%. But for the traditional defence industry – shells, armoured vehicles and so on – those profit margins simply don't exist. The margin is around 5-7%, maybe up to 10% at most. So for those manufacturers, this government 'solution' is a barrier, not support," he added.
The situation is very different for drone manufacturers.
Ukraine is effectively creating an entirely new global market, where competition is still limited to only a handful of countries. Many companies are only now discovering what the real market price for their products actually is.
In this environment, the profit margins on certain products can be significantly higher than those typically seen in the traditional defence industry.
That's why an additional 20% levy is unlikely to be a critical issue for manufacturers of innovative unmanned systems. If a product is being sold at a 300% margin, it can absorb the 20% government levy and still be commercially viable.
The provision imposing a 30% levy on exported components is equally controversial.
During the meeting at the Parkovyi Exhibition and Convention Centre in Kyiv, manufacturers of cameras, electronics and other components expressly told government officials that that rate would make them uncompetitive on international markets.
Their main competitors are Chinese and European companies. Ukrainian manufacturers can currently succeed because their products are slightly more expensive than Chinese alternatives but somewhat cheaper than European ones. Once the additional levy is introduced, that competitive advantage simply disappears.
The new mechanism won't encourage their exports – it makes them economically unattractive.
There is another issue in the government resolution that appears entirely avoidable. Under the new rules, companies must pay the 20% or 30% levy when submitting their application, before they know whether an export permit will be granted. The resolution provides no mechanism for refunding that payment.
In other words, if a company pays the levy but is then refused an export licence, there is no way of getting the money back.
The biggest problem with the new mechanism, however, stems from its dual nature and is not so much about the amount of the levies as the limited geographical scope of exports.
The Fast Track is tied to countries that have signed Drone Deal framework agreements with Ukraine, and as of early July, fewer than ten countries had done so.
Ukraine hopes to conclude framework agreements with both the EU and the US in the near future. Even so, that would still only represent part of the global market.
Ukraine's traditional export destinations have been Southeast Asia, North Africa, Latin America. What about those markets? The new system largely ignores them.
Indonesia, Pakistan, India, Brazil and Algeria are all markets where American, European, Turkish and even Russian defence manufacturers are already active. Only Ukraine is restricting itself.
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As is often the case with Ukrainian reforms, opening up the country's arms exports has not solved every problem or necessarily the right ones, and has even created a few new challenges along the way.
The mechanism has been hailed as opening up arms exports, yet in practice it only opens up a specific segment of the market and only for a limited group of countries.
That's why most of the experts Ukrainska Pravda spoke to see it not as the completion of the reform, but only the beginning.
"Basically, we were presented with the mechanism after the Cabinet of Ministers had approved the resolution," Ihor Fedirko, head of the Ukrainian Council of Defence Industry, told Ukrainska Pravda. "Then everyone was told, 'Send us your proposed amendments and we'll revise it.' Why the market wasn't consulted beforehand I don't know. Still, the willingness to listen to us and address the shortcomings is a positive sign. I think it will take about six months to refine the mechanism into something that genuinely works."
It's true that the resolution contains numerous shortcomings, and that many of its provisions will almost certainly need to be revised after the first few months of implementation.
But for the first time since Russia's full-scale invasion, the government has at least introduced a clear mechanism that will enable Ukrainian defence manufacturers to enter international markets.
By Roman Romaniuk, Ukrainska Pravda
Translated by Anastasiia Lipara, Yelyzaveta Khodatska and Tetiana Buchkovska
Edited by Teresa Pearce