For the past twenty years I have participated in the excellent annual Yalta European Strategy (YES) conferences, but this year I felt a certain trepidation. How depressed would Ukrainians be after three and a half years of war?
To my happy surprise, I found that Ukraine has turned the tables not only on Russia but also on the Western world. Militarily, the Ukrainians think they have virtually stopped the Russian summer offensive, with Moscow’s forces gaining minimal territory at tremendous cost.
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The talk of town was the innovative Ukrainian armaments industry, especially the many drone producers. Prominent participants Anne Appelbaum, Thomas Friedman and Chrystia Freeland have reported similar observations.
Growing self-sufficiency in weapons production
For years, Ukraine has relied on Western arms supplies, but now Ukraine has become almost self-sufficient in some weapons systems.
I talk regularly to Oleksandr Kamyshin, President Zelensky’s advisor on arms production. A year ago, he told me that Ukraine could produce 1.5 million drones in 2024. In January he said it would be 4.5 million this year. Now, Ukraine has the capacity to produce 10 million with sufficient financing, but quality is more relevant than the number. Kyiv now has the ability to export some drones.
Many foreign observers are impressed by the innovativeness and speed of Ukrainian arms developments. A year ago, Kamyshin told me that Ukraine had 500 startups producing arms, now there are nearly 1,500. The two most talked-about new systems are interceptor drones – that can take down the Iranian-designed, Russian-produced Shaheds – and long-distance Ukrainian ballistic missiles, which were understandably shrouded in secrecy.
Ukraine Unveils New Underwater Drone, the Sea Trident
The Ukrainian arms industry expands production at impressive speed. Ukrainian-produced weapons are generally much cheaper than their Western equivalents, compelling producers to compete with each other to conclude partnerships with Ukrainian startups. Suddenly, Ukraine barely needs to ask for Western arms but rather seeks funding for its own arms production.
Imitation is the sincerest form of flattery
Russia copies successful Ukrainian arms and tactics and scales up production swiftly, with most is being produced by the state-owned Rostec conglomerate.
With Western countries, such as Poland and Denmark, now in danger of being attacked by Russian drones, the tables have turned. Poland has offered Ukraine common air defense to defend half of its territory and Denmark has requested technical counter-drone assistance from Kyiv – which instantly sent a competent delegation. Ukrainian interceptor drones appear to have the most potential to provide effective defense against Russia’s drones.
The financial imperative
The Ukrainian need for Western financing has become ever more urgent. The Ukrainian government is sensibly very polite about it, but US President Donald Trump has stopped all American support for Ukraine – military as well as financial – without explanation.
Trump’s special envoy for Ukraine General Keith Kellogg sounded pretty confused when speaking at YES. He claimed that “the alliance has never been stronger,” when the opposite is true. He insisted that he wanted Ukraine to win, not revealing why his president has stopped all support for Ukraine. Ukrainians were courteous towards Kellogg, given that he is the person close to Trump who is most supportive of Ukraine.
The key issue is money
The IMF mission was in town. Apparently, they remain satisfied with the Ukrainian government’s economic performance, but they see a big financial gap in the current program, which ends in the first quarter of 2027. They did not state the fiscal gap publicly, but according to Bloomberg it is $65 billion over the next eighteen months. In effect, Europe will have to cover it with some help from Japan and Canada, since the United States does not support Ukraine.
Ukraine currently needs roughly $100 billion a year in international assistance, $40 billion to finance the budget deficit of about 20% of GDP and $40-$60 billion in arms.
Europe seems to have finally woken up to Ukraine’s financial needs. In mid-September, EU Commission President Ursula von der Leyen stated that the EU members could provide Ukraine with some €140 billion in interest-free loans secured against frozen Russian sovereign assets as collateral.
Apparently, this can be done legally with qualified EU members’ majority approval so that Hungary’s Viktor Orbán cannot veto it. This funding would be received in tranches and can be used for both military needs and budget financing.
The US is not expected to play any role. Its International Development Finance Corporation (DFC) had a delegation in Kyiv, but they said they would only offer $125 million in investment funds to Ukraine if matched by Kyiv.
So, why bother with the US at all? The best we can hope for is that Trump doesn’t ally with Putin. Since his inauguration. He has adopted no new sanctions on Russia, while undermining the aircraft and oil sanctions on Russia.
One consequence of this is that the big US arms producers are losing out. Having realized that he is trying to force NATO to buy American arms for Ukraine with European financing. Good luck with that! Arms producers that are not present on the innovative Ukrainian battlefield are likely to become rapidly obsolete.
In contrast the EU is about to adopt a rather tough sanctions package on Russia – its 19th – which will include a prohibition against imports of LNG by EU members. Meanwhile large European arms companies are thriving in cooperation with their Ukrainian counterparts – and reaping the benefits on the stock markets.
After my week in Kyiv, I left with renewed hope for Ukrainian victory.
The views expressed in this opinion article are the author’s and not necessarily those of Kyiv Post.
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