How Ukrainian miltech recovers from Russian attacks

BLUF: Ukrainian manufacturers protect their facilities against Russian threats by spreading production across different locations, moving facilities to safer areas when it`s possible, and utilizing underground production. Although government funding for production recovery exists, it’s not enough, leaving most miltech companies to rely on their own resources.

Defence City has been officially launched in Ukraine, aimed at scaling up and modernizing weapons production while fostering defense innovation.

Volodymyr Zelenskyy has replaced the leadership of key defense agencies: the Main Intelligence Directorate, the Ministry of Defense, and the Security Service of Ukraine. 

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Russia’s massive missile and drone strikes systematically target not only energy and civilian infrastructure in Ukraine but also defense industry enterprises. 

Accurate recent data about damaged enterprises is not available due to security reasons. But according to the latest information released at the end of 2023, Russian strikes damaged 37 defense industry enterprises.  

Now Russian forces have begun targeting such production facilities more frequently than in the first few years of the war,  Sergii Vysotskyi, Deputy Chair of NAUDI, a union of Ukrainian producers of defense equipment, told The Arsenal. 

Enterprises are thus forced to physically protect their efforts by dispersing production, reinforcing buildings, and adjusting logistics and work schedules. On top of that, they have to incorporate plans for the potential partial or total destruction of infrastructure into their business processes.

A key challenge is not only maintaining production during attacks but also restoring it quickly if there is damage. The speed of these processes directly affects the stability of supplies to the frontline and the overall resilience of the defense industry in wartime conditions.

The security of defense production in Ukraine begins long before any potential strike. 

One of the most fundamental and effective ways to protect production is by dispersing it, explained Anton, deputy director of a defense company and a representative of Aerorozvidka, a civic organization that promotes the development of military solutions. The company’s name and activities, as well as the speaker's surname, have been withheld for security reasons.

Companies deliberately avoid centralized sites and split their operations across several independent locations. Administrative teams, sales, accounting, and production units work separately, often without physical contact with one another. Production itself is also divided into small technological segments whenever possible. This way, a strike on one site will not cripple the entire company, he told The Arsenal. 

This approach makes facilities less attractive targets for the enemy, since small, dispersed sites are more challenging to detect and economically less appealing to hit, Anton said. 

Over 40 percent of manufacturers surveyed for a recent study operate five or more production sites, typically located in different regions, according to joint research by the Tech Force in UA (TFU) association of defense manufacturers and the Better Regulation Delivery Office, an independent expert-analytical center. 

“The conditions in which Ukrainian manufacturers work today make them highly competitive on the global market, as they restore production and ensure the delivery of equipment,” Kateryna Mykhalko, executive director of TFU, told The Arsenal.

Protection also extends beyond the workshops to the entire production and logistics chain — from component procurement to the shipment of finished products, Anton added.

Access control and personnel screening are crucial as well. Even routine tasks such as water delivery or technical maintenance are viewed as potential channels for information leaks. Contractors undergo background checks, and access for outsiders to production facilities is minimized.

This security model requires a great deal of resources, leading to increased costs in servicing all the locations of dispersed production.

Manufacturers also pay special attention to underground or protected production shelters. This is highly effective, but in practice, implementation is challenging, Anton said. Most available facilities are already in use for critical production, and accessible spaces typically require major renovations and significant investments.

If a private defense industry enterprise is hit, the burden of restoring production largely falls on the manufacturer, said Vysotskyi of NAUDI. According to him, budget funds for the restoration of enterprises after attacks in Ukraine are provided by the government, but they’re allocated only to state-owned enterprises. For private defense manufacturers, which make up about 80% of the market, there is currently no effective support model, Vysotskyi told The Arsenal.

For an enterprise to be included on the list of recipients of state funds, a Ministry of Defense working group has to review documents to confirm the need and feasibility of funding its recovery. In order to qualify, a company must have state defense contracts, participate in defense industry reforms, and provide proof that its facilities were damaged by hostilities, the MoD told The Arsenal.

The destruction of production facilities at defense enterprises inevitably leads to delays in fulfilling state defense orders, Vysotskyi noted. That is why the state should be more involved in supporting the restoration of production. 

The conditions for postponing the fulfillment of a contract must be specified in state contracts, the MoD added. 

However, deadline extensions don’t fully solve the problem, Vysotskyi said. The situation becomes more complicated when Russian attacks destroy not only infrastructure but also finished products that had already been produced under a state contract and were meant to be delivered to the Armed Forces of Ukraine. In that case, companies face a double financial burden, as they must restore production lines while simultaneously remanufacturing the destroyed batch of products.

According to Vysotskyi, the main priorities for the government should be:

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Beginning this year, Ukraine officially launched its Defense City Regime. The regime and register of residents is managed by the Ministry of Defense.

Benefits aimed at boosting the domestic military-industrial complex and removing investment barriers include:

The first resident is the company producing Vampire bombing drones and Shrike FPVs, although the company was not named by the government. 

General Cherry, a Ukrainian defense tech company, sees residency in Defence City primarily as an opportunity to scale up production faster, plan long-term investments more easily, and operate in a more predictable regulatory environment.

The company is currently studying residency conditions and models. The final terms of the admission procedure depend on the company's readiness with documents and compliance with the criteria, but in general, it can take a much shorter decision-making horizon, not months, the company told The Arsenal.

Ukrainian entities are already active in EU defense initiatives that facilitate joint procurement, such as SAFE (Security Action for Europe). Participation in the European Defence Fund (EDF) is the final step of fully integrating Ukraine into the European Defence Technological and Industrial Base.

Despite the Council’s recent decision to open the ‘mini-omnibus’ legislative package to Ukrainian participants, a few procedural hurdles remain. Ukraine and the EU must still finalize a formal association agreement and negotiate specific terms and conditions.

"It is only then that Ukraine will be considered an effective EDF associated country," the European Commission told The Arsenal. "Depending on the signature of the abovementioned Association Agreement for Ukraine’s participation in the EDF, Ukrainian entities will be eligible for EDF funding."

Russian forces have put an infrared spotlight on a Shahed drone, likely intended as a countermeasure to thwart interceptor drones and aircraft.

Thermal imaging cameras do not form images based on visible light but on temperature. A specialized sensor matrix detects thermal radiation and converts it into a thermal map used by operators or targeting algorithms. If part of the sensor is overloaded with radiation, a blind spot may appear, obscuring the image, Pavlo Kosolapkin, CTO at Frontline Robotics, explained to The Arsenal.

Thermal imagers can be disrupted only by radiation at a very specific wavelength, and achieving this on small drones requires powerful, precise lasers, making the Russian countermeasure of limited practical effectiveness.

However, conventional infrared spotlights and thermal imagers operate in different parts of the infrared spectrum, Kosolapkin said. As a result, effective blinding of a thermal imager would require radiation with a wavelength close to the sensor’s operating range, which is only achievable using high-power, industrial-grade lasers. 

Such systems are bulky, energy-intensive, and largely impractical to install on drones of this type, significantly limiting the effectiveness of such countermeasures.

Ukrainian defense tech company Frontline Robotics has developed an upgraded robotic turret, Buria 2.0, which is compatible with two types of weapons at once: a 40 mm automatic grenade launcher and the Browning M2 heavy machine gun.

The new version is primarily used on ground robotic platforms or armored vehicles. However, it can also operate in a static configuration on a tripod, the company told The Arsenal.

Each weapon has its own automatic firing system, while communication with the turret is done via satellite, enabling long-distance operation.

The developers say the turret’s compatibility with additional weapon types may be expanded in the future, depending on requests from military units.

Starting in 2026, Ukrainian military units will be able to purchase drone components using general state budget funds. Previously, they had to purchase drone parts through a special fund, which limited their purchasing flexibility.

The new initiative will significantly increase operational speed, providing units with the proper conditions to quickly replenish and adapt unmanned systems for specific tasks.

“Greater financial flexibility allows units to purchase additional components and accessories and better adapt equipment to specific combat tasks — without unnecessary delays and bureaucracy,” the MoD told The Arsenal.

By: Oksana Zabolotna

Tax and customs incentives for the import of goods for security and defense needs

Draft Law №14170 and №14169 dated October 30, 2025

Why it’s important: These changes lower the cost and simplify the import of critical components and equipment needed for defense production. 

Extending customs and VAT exemptions, including for generators and simulators, helps manufacturers and developers bring in necessary technologies faster and with fewer financial and administrative barriers.

The law now also extends to modernization, not only production and repair. This allows military-tech companies to upgrade and adapt already deployed systems to meet new operational needs without legal uncertainty. 

Proposals:

Stage: Entered into force on December 26.

Initiator: A group of 34 Members of Parliament from Holos, Servant of the People, European Solidarity Trust, and For the Future led by Roman Kostenko. 

What’s next: Implementation of the law

TECHUNITY LLC is a Ukrainian defense-tech company founded in 2025. It develops JARVIS, a universal onboard computer for UGVs, fixed-wing UAVs, unmanned vessels, and remotely operated vehicles.

The system supports digital, analog, and radio communications, video processing, autopilot, and AI, features IP67 protection, and a proprietary Jarvis OS. JARVIS is already deployed in combat operations and adopted by Ukrainian unmanned systems manufacturers.

The company is seeking a smart investor or strategic partner with experience in unmanned systems manufacturing or access to international defense markets to support scaling, export compliance, and full localization of production in Ukraine, said Vasyl Duzhak, the company's CEO.