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Ukrainian defence companies should treat production abroad as a strategy of its own, not as a second-best form of export. A finished drone that crosses a border is one sale. A licence, a joint venture or a line in Germany or Ohio is a position inside someone else’s supply chain, and it keeps running after delivery.
For most of this war a Ukrainian drone maker had one customer, the Armed Forces of Ukraine. That customer is still the most important and the most demanding. It cannot buy everything the industry can now build. The National Security and Defence Council estimated in late 2025 that public money could pay for no more than half of the sector’s output.
Three pressures push companies toward production abroad.
Money. A single customer looks like a risk to an investor. Contracts with several states show that a plant can deliver and that its product passes foreign tests. A foreign partner also puts capital into the business.
Safety. russian strikes hit production sites. A second line in a safer country protects supply. Kyiv frames Build with Ukraine the same way: replicate lines abroad, keep R&D and core skills at home.
Rules. Buyers write local production into their programmes. The EU’s SAFE instrument asks that at least 65% of the cost of components come from the EU, EEA-EFTA states or Ukraine. Ukraine counts as inside, which helps. The US Drone Dominance programme goes further. It aims for a fully domestic supply chain for small drones, and Ukrainian firms must bid through a US entity. A finished drone from Kyiv meets a wall in both places. A drone built in Poland or Ohio does not.
Ukraine’s own export rules add cost. Since July 2026 each export contract needs state permission. Of the proceeds, 20% for finished products and technologies, and 30% for components, go to a state fund for the defence industry. Finished products need a contract of at least UAH 15 million. The Armed Forces of Ukraine get first call on output.
There are four ways to put Ukrainian design to work abroad. They differ in who owns the intellectual property, who pays, and how much control the Ukrainian company keeps.
| Model | What crosses the border | Ukrainian company keeps | Partner brings | Main risk |
|---|---|---|---|---|
| Direct export (“Buy from Ukraine”) | Finished product | Design, production, full control | A buyer and an end-user check | A permit per contract; plants stay exposed to strikes |
| Licensed production | The right to build to your design | IP ownership, royalty income | Plant, capital, certification | Quality drift; the partner learns your design |
| Joint venture or co-production (“Build with Ukraine”) | Design, integration know-how, field feedback | IP (Kyiv’s stated position), R&D at home, equity | Capital, factory, certification, market access | Governance, export permit, a slow partner |
| Own subsidiary abroad | People and capital | Everything, including all of the cost | Local grants and land | Most capital, most exposure |
Licensed production is the lightest model. Norway signed a declaration in April that lets its companies build Ukrainian unmanned systems under licence. Kyiv’s stated line is that technology goes abroad without a transfer of IP rights, with controls on its use and re-export.
Joint ventures carry most of the policy weight. Build with Ukraine started in June 2025 and works through joint ventures backed by government-to-government agreements. The Ukrainian side provides skilled people and specialist knowledge. The partner provides capital, technology, production infrastructure and certification. In some formats the Ukrainian military can receive between half and all of the output.
Own subsidiaries are rare. Ukrspecsystems opened a factory and test centre in eastern England for reconnaissance drones, an investment reported at £200 million. Denmark offers financial support to firms that set up production on its territory.
There is also a mirror image, Build in Ukraine, where foreign firms produce or service equipment inside the country. This article is about the direction that leaves it.
At least 180 international partnerships now exist in Ukrainian defence tech, and a third of them were signed in the last twelve months. That is the count from the Kyiv School of Economics Institute in September. Germany leads with 36, Denmark has 18 and the US 16. Unmanned systems make up 26% of the total. Forty-one partnerships sit under Build with Ukraine, meaning production abroad.
Germany is furthest along. Quantum Systems and Frontline Robotics formed Quantum Frontline Industries. Serial production of a multi-role drone began in Germany in February 2026, with a plan for 10,000 units a year. TAF Industries and Wingcopter signed a memorandum for a drone joint venture. Several of the German projects are still at memorandum stage.
The United Kingdom hosts the Ukrspecsystems factory. It has also produced Octopus interceptor drones for Ukraine since January, with output of up to 1,000 a month planned. The companies involved are not named.
Denmark, Finland and Latvia. On 24 February four Ukrainian manufacturers signed with partners in these three countries. The package is worth about €800 million. Denmark started its Build with Ukraine track in June 2025 with DKK 500 million. Estonia, Lithuania, Romania and Norway have signed framework agreements since.
The United States works through localisation. General Cherry and Wilcox Industries announced a joint venture in New Hampshire. It plans to make components in the US and to earn Blue UAS certification for government use. F-Drones, through its US company, picked Holland, Ohio for its first American assembly centre after a Pentagon prototype order. The site is expected to create at least 300 jobs.
At least 22% of the deals and memoranda in the KSE Institute count have stalled. The causes repeat.
Export permission. The main brake is export legislation and unclear steps across several agencies. Ukraine eased dual-use export rules in July, but a licence is still a convoluted process with no guarantee. The report’s editors describe many windows and no guide to which one to open.
The customer. Most joint output is built for Ukraine and paid for through partner-state aid. Analysts at OSW expect production to serve European and third-country buyers later. Until then this is a wartime supply arrangement. A good one, but not yet a commercial market.
IP and money. There is still no IP framework for joint ventures. Wartime currency rules limit Ukrainian investment abroad and the profit foreign firms can take out of Ukraine.
Components. In April Kyrylo Budanov said the component base of Ukrainian drones is not Ukrainian. A foreign line under SAFE or Pentagon rules must source locally. What Ukraine brings is design, software, integration and the speed of field iteration. That is what a partner pays for. It is also what is easiest to copy.
Politics and diligence. Joint ventures with state-owned firms stay active far less often than private ones: 62% against 96%. Ownership structures in Ukrainian firms are hard to check for due diligence. Some partners attach conditions that ignore how the war works, such as a repair centre near the Polish border, hundreds of kilometres from the front.
Talent. Kyiv wants joint production to keep R&D and skilled people in Ukraine. The export permit is its lever.
Winning abroad is separate work. In the second round of the Pentagon’s Drone Dominance programme, published on 18 September, none of the four Ukrainian companies that announced their entries reached the top five. One of them told Defender Media that export permits, non-Chinese components and visa delays slowed it down. One British-Ukrainian entry, Skycutter with SkyFall, placed fourth in the deep strike category. A joint venture is not a shortcut to a contract.
Seven moves before a term sheet is signed. None of this is legal advice. Use counsel who knows both export regimes.
Four signals will show whether this is an industry or a wartime arrangement.
The model is sound. It is early. Companies that treat it as a manufacturing strategy, with IP, permits and components settled first, will still be running lines in three years. Companies that treat it as an announcement will not.
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