Despite the total chaos after USSR collapse the military-industrial complex remains an important sector of Ukrainian economy. And for the last years it has been improving its performance. However, there are still problems and the defense industry does its best to solve them.

At the period when Ukraine declared its independence, there were 3594 defense enterprises working on its territory with the staff of three million employees. About 700 enterprises were engaged into military production, including 205 manufacturing bases and 139 research and production association with the total staff of 1.45 million employees. The chaos of 90ies hit this industry the most.

However, according to the data of the Cabinet of Ministers, there are still 140 basic enterprises of the military-industrial complex, working in the country, and the very complex remains one of the world leaders on arms export. Earnings of the special export operator "Ukrspetsexport" (including subsidiaries) exceeded for the first time one billion dollars in 2011. The concern has representative offices in Russia, China, Myanmar, India, Pakistan and Egypt. In addition, all enterprises on development, production, service support and export of military machinery and ammunition have been united into single state association "Ukroboronprom" founded last year.

Director General of "Ukroboronprom" Dmytro Peregudov confirms that the state has concluded five-billion-dollar arms contracts for the next 4-5 years. In 2011 Ukrainian military-industrial complex supplied military goods and services in 62 countries. "The main consumers of our defense production are Asia (45%) and Africa (30%), namely India, Thailand, Algeria, China and Iraq. Aviation technology tops the list of the most demanded goods (43.1%), while army equipment takes the second place (36.4%). Supply of air defense weapons, including repair services and modernization, makes 10% of the total military industry's activity," the official told ForUm.

Major lines

Indeed Ukraine has kept a good production base of military cargo aircrafts. The key aircraft manufacturers as "Antonov" concern and Kharkiv aircraft factory are technically ready to produce and maintain such heavy cargo planes as An-124 Ruslan and An-225 Mria. And among the latest developments there are military cargo plane An-70 and multi-mission aircraft An-140. Russia Defense Ministry has included An-140 in the state armament program, and in 2013 the Ukrainian machines will refill the park of Russian Air Forces. Kazakhstan and Ukraine are creating a joint venture on production of this very model. Kharkiv aircraft factory will produce the key parts and "Motor Sich" will produce engines.

The Kyiv aircraft factory produces military cargo plane An-32. Following the contract, signed with Iraq in 2009, Ukraine has to supply other six machines by the end of summer of this year. Ukraine's repair and modernization base is of no less importance. There are about ten aircraft-repair factories in the country, capable to maintain all types of aircrafts and helicopters of former USSR production. Air Forces of foreign countries have more than 300 aircrafts An-24, An-26 and An-32 and over 1500 combat helicopters Mi-8, Mi-24 and Ka-25, engines of which are produced by "Motor Sich". No surprise that Ukrainian factories are overloaded with repair orders. For the moment, Ukraine is carrying out a contract, signed with India, on modernization of 105 units of An-32. Ukraine also has similar contracts with Egypt and other countries. Kyiv also supplies used aviation equipment: three strike-fighters Su-25 and two helicopters Mi-24 were delivered in Chad recently.

As for army equipment, the domestic tank T-80UD and its next model T-84, remain the most popular. The industrial production is carried out by Malyshev factory (Kharkov). The biggest ever contract on supply of 320 units of T-80UD was concluded with Pakistan. The contract saved the production and enabled further developments. The newest modification of T-84 is called "Oplot". In September 2011 Ukraine signed a contract on supply of 49 units of "Oplot-M" in Thailand to replace old American machines M41A3. The cost of the deal made about 240 million dollars. Ukraine also sells old Soviet tanks. In last years Ethiopia bought 200 T-72 at 100 million dollars, Kenya bought 33 similar units, Congo purchased 100 T-72 and 30 T-55, while Sudan got 60 T-72 and 55 T-55.

Armored fighting vehicles (AFV) are also in demand. In 2009 Ukraine signed a contract to supply 420 units of Ukrainian modern AFV-4 to Iraq at the expense of US at $457.5 million. 121 AFV 3-E1 costing $140 million were delivered to Thailand. Kazakhstan and Ukraine signed an agreement on joint production of AFV-4 at the amount of $150 million. The contract with Egypt on modernization of 200 AFV OT-62 "Topas" has also met its success.

Ukraine also has a decent base of ammunition production, including the latest developments. One of the headliners - "Artem" factory, which used to produce missiles for air defense system of С-200/С-300 type, now produces ammunition for armored vehicles and aircrafts. This May the holding concluded a contract with India on delivery of medium guided aircraft missile P-27 at the amount of $246 million. According to the holding's president Stanislav Smal, "Atrem" is the only manufacturer in CIS, specialized on this kind of missiles, used on MiG-29, Su-27 and Su-20 aircrafts.
Not only export

The national defense department has the so-called "ship program", known for corvette construction projects. The state program for the period till 2021 provides for the construction of ten vessels of this class. The total budget of the program makes 16.1 billion hryvnias, though this year the government has allotted only UAH 433 million. A corvette is expected to be 60% built of domestic details and key parts. The rest will be supplied by NATO countries (Italy, Germany, France, Denmark). To remind, Ukraine used to produce 40% of the total number of USSR vessels.

According to the defense department officials, the military doctrine also provides for the construction of small-size combat vessels for the army and internal troops.

Anyway, it is wrong to declare that Ukrainian military-industrial complex works for export exclusively. Though the domestic orders are minimal, they still exist. In 2009 Kyiv ordered ten "Oplot" tanks from Malyshev factory, costing UAH 295 million. Unfortunately, the contract is being carried out very slowly due to lack of financing - the biggest systemic problem of the military-industrial complex of Ukraine. There is another domestic order on upgrading of 19 tanks T-64 up to the technological level of BM "Bulat". Mykolayv machinery repair factory is carrying out the major repair of 17 units of AFV-80, costing 7.6 million hryvnias. Combat aircrafts MiG-29and Su027 are also undergoing gradual modernization.

Defense minister Dmyro Salamatin declared recently that the condition of the military-industrial complex of Ukraine is national problem. According to the minister, the defense department needs to fix debt problem and to attract more financing in order to develop and upgrade the scientific and production base. He also added that all military equipment being produced for export will be soon introduced into national Armed Forces. Director of the Army research institute Valentyn Badrak specifies: all armament, produced in Ukraine is an upgraded version of Soviet technologies.

Vectors of development

Most experts agree that armament production will grow in the country. In 2011 Ukraine dropped out of the top ten global armament suppliers. But this is only one side of the coin, Badrak says. Our country has been included into the international ratings of exporters with the most dynamic growth of stock of orders. Hence, for the military export period of 2003-10 Spain had the highest ratio between the amount of received orders and fulfilled orders - 2.1, while Ukraine had 1.473, hence taking the third place after Italy.

There are grounds to believe that domestic exporters will keep the high activity in the next years. In this respect the key importance is now given to the political and military situation in a number of world regions, namely Iran, Saudi Arabia and United Arab Emirates. 

Another hot point - Africa and its countries of permanent conflicts (Somali, Ethiopia, South Sudan) also give work to Ukrainian gun smiths.

South-Western Asia (Thailand, Malaysia, Vietman) and India, which develop and implement national defense programs to strengthen their positions, also remain the major clients.

The competition on the market in quite tense, but as we see, Ukrainian military-industrial complex has huge and powerful potential to remain onboard.

Andriy Boyarunets


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