Oleg Davygora21:36, 18.10.24

This week, Western allies are promising new support for Ukraine. While Zelensky pleads for help, there is another aspect that has been overlooked so far: the need for private and public capital for Ukraine’s defense industry. This is what  journalist Gillian Tett, head of the US editorial board of The Financial Times, writes .

According to him, the products of military startups in Ukraine are not only innovative – for example, drones with artificial intelligence – but also relatively cheap.

He cited the example of Madyar’s Birds, a company founded by former entrepreneur and politician Robert Brovdy. His company employs about a thousand people who produce drones and shells in Ukraine.

“What costs the Americans $1,200, we do for $58. Within six months, combat operations will be unmanned because we use artificial intelligence to replace human operators,” he said.

Brovdi claims he is desperately short of working capital. He is not alone: ​​presidential adviser Alexander Kamyshin confirms that the Kyiv government is so strapped for cash that it only has $10 billion for military purchases this year, creating a $10 billion funding gap. The journalist noted:

“A sensible solution would be for Western allies to channel some of their aid to Ukraine, say from frozen Russian assets, into funding the country’s defense industries in addition to scrapping old Western components. Such investments would not only help Ukraine, but would also help the West rethink its own defense production.”

In his view, this is critical. Former Google CEO Eric Schmidt noted that the innovations emerging in Ukraine are changing the nature of war in ways that could make the expensive investments that Western governments have made so far unnecessary.

It is noted that one country is already acting in accordance with this logic: Denmark recently agreed to invest 4.2 billion kroner in Ukrainian weapons and technology. Defense Minister Troels Lund Poulsen now hopes to create a pan-European fund of 1 billion euros.

The author believes that while European asset managers have traditionally shied away from investing in the defence industry, this attitude is slowly changing. Denmark recently became the first: its pension funds are investing DKK 40 billion in Danish warships.

“The European Investment Bank currently focuses on civilian infrastructure projects. But it could become a natural source of funding for Ukraine’s budding defense industry if European policymakers accept the principle that Ukraine’s defense is crucial to the broader defense of Europe and its democratic ideals,” the article notes.

Tett believes that even if European asset managers are increasingly willing to support defense investments, few will agree to do so in Ukraine – at least for now. 

“But the bottom line is that America and Europe need to be more creative in how they support Kyiv. If Denmark has gone down this path, then larger Western states should follow – not just for Ukraine’s sake, but for their own long-term security,” he added.

(C)UNIAN 2024