Controlled Export of Ukrainian Weapons: A New Mechanism for Defence Industry Manufacturers

Ukraine is launching a special mechanism for the controlled export of Ukrainian weapons and defence technologies to partner countries under the Drone Deal format. The new rules are intended to create a more predictable model for Ukrainian defence manufacturers to enter international markets, while preserving the priority of meeting the needs of Ukraine’s Defence Forces.

The introduction of this mechanism forms part of a broader state policy aimed at developing Ukraine’s defence-industrial complex, attracting additional financial resources, scaling up production, and strengthening international defence cooperation. In this context, the National Security and Defence Council of Ukraine has previously emphasised that controlled export should be applied only provided that the unconditional priority of the needs of the security and defence sector is maintained.

Overview of the Changes: What the New Mechanism Provides For

The policy does not provide for the removal of export restrictions but instead introduces a special controlled regime under which the state will retain decisive influence over the key parameters of export: the list of permitted goods and technologies, the range of partner countries, the terms of supply, and the subsequent use of Ukrainian defence products.

Export will be permitted to designated partner countries under the Drone Deal format. Under this policy, manufacturers will be able to work with them directly. At the same time, each contract will be reviewed both from the perspective of Ukraine’s defence needs and in terms of technology control.

Among the key features of the new mechanism, several important points can be highlighted:

export applications are expected to be reviewed within up to 30 days, which should provide manufacturers with relatively swift access to foreign markets
a minimum threshold of UAH 15 million will be established for contracts involving finished products, while no such limitation is envisaged for the export of components
part of the funds from export transactions will be allocated to a special fund of the state budget as a contribution to the development of the defence-industrial complex
the state will separately determine the list of countries to which Ukrainian defence products may be supplied
a list of critical goods and technologies that will not be subject to export will also be created
control will be introduced over the use of Ukrainian technologies, including with respect to their further re-export or transfer to third parties

The new mechanism should also be considered separately in connection with the Defence City regime (see also: “Law on special legal regime for defence industry enterprises ‘Defence City’ has been adopted”). For defence industry manufacturers that have obtained or plan to obtain Defence City resident status, controlled export may become an additional element of a broader regulatory model combining special tax, customs, currency control, and export control conditions with the possibility of expanding production and developing international defence cooperation.

Export as a tool for financing the defence industry

One of the key ideas of the mechanism is to make export not only a source of revenue for businesses, but also a tool for supporting the entire industry.

Part of the funds from export contracts will be allocated to a special fund: 20% from the export of finished products and technologies, and 30% from the export of components. In this way, the state is effectively integrating export into the financing model of the defence industry.

For companies, this means that an export contract should immediately be viewed more broadly than an ordinary foreign economic transaction. The contributions will affect the economics of the deal, from pricing to payment structure and financial planning.

Priority of defence needs

The opening of export opportunities does not create an automatic right to export: the state will retain the ability to refuse approval of a transaction.

If the products are needed by the Defence Forces or are included in the list of critical goods, an export permit may not be granted. Lists of such goods will be formed and regularly updated, and the range of countries with which such transactions are possible will also be determined.

For businesses, this means that the risk of refusal to approve an export should be taken into account as part of the regulatory model. Therefore, already at the stage of negotiations with a foreign partner, it is advisable to assess not only the commercial parameters of the contract, but also the potential sensitivity of the products for the state and the needs of the security and defence sector.

Accelerated process without reducing oversight

The declared timeline for reviewing applications up to 30 days should be noted separately. If this timeline is observed in practice, it may increase the predictability of the export process for Ukrainian manufacturers and their foreign counterparties.

At the same time, speed does not mean simplified requirements. End-user verification, compliance with export control rules, and sanctions compliance will remain in place.

Therefore, companies should prepare in advance by having a clearly described product, confirmed production capabilities, a transparent ownership structure, and a clear model for the use of technologies.

Intellectual property and re-export control

A separate focus of the mechanism is the protection of Ukrainian technologies. The transfer of technologies is permitted, but without the assignment of intellectual property rights and with clear restrictions on their use.

Re-export or transfer to third parties is possible only with the approval of the Ukrainian side. If products created on the basis of Ukrainian technologies are subsequently sold to other countries, part of their value must also be transferred to the budget.

In this model, intellectual property becomes not merely a technical contractual issue, but one of the central elements in structuring export contracts in the defence industry.

It is particularly important to:

clearly define who owns the rights to technologies and developments
limit the ways in which they may be used by the partner
provide for a prohibition on unauthorized copying or transfer
regulate matters related to subcontractors and production partners
set out the rules for re-export and liability for their violation

What this means for manufacturers

The new mechanism creates real opportunities for Ukrainian companies, from scaling up production to entering new markets and attracting investment.

At the same time, it also raises the requirements for businesses’ overall preparedness. Participation in such export operations requires not only a product, but also a well-established legal and compliance infrastructure.

Before entering export markets, companies should check:

whether they can simultaneously perform state and export contracts
whether intellectual property rights have been properly formalised
whether a complete set of technical and permitting documentation is available
whether the products fall under restrictions as critical goods
whether the partner meets the requirements applicable to partner countries
whether budget contributions have been taken into account in the financial model
whether the necessary sanctions and export control checks have been carried out

Key takeaways for the defence market

The controlled export mechanism is an attempt to balance between two objectives: giving businesses an opportunity to grow while maintaining full control over critical resources.

Success in export markets will depend not only on the technological level of the products, but also on how prepared the company is to operate under enhanced regulatory oversight, properly structure export contracts, confirm its production capabilities, and ensure the protection of defence technologies.

For additional information, please contact Asters Partner Yuna Potomkina and Counsel Anton Sintsov.