Ukraine’s defence companies had initiated at least 180 foreign partnerships by mid-2026, but around a fifth had stalled, according to the Kyiv School of Economics’ KSE Institute.

The institute’s report, published in September, puts the stalled share at 22%. Its count covers business-to-business cooperation since the full-scale invasion and treats each company and line of operation as a separate partnership, including preliminary projects without binding commitments.

The study, "Beyond aid", maps how Ukraine is trying to reduce its dependence on donated weapons with joint production, foreign investment and partner-funded orders for its own factories. The authors identify implementation as the main obstacle: "the main problem is making partnerships work after the establishment," the authors write, with many cooperation agreements "stuck at the level of memorandums" while the system "still suffers from fragmented authority, unclear rules, weak administrative capacity and unstable funding".

"Our partners are interested in collaborating with Ukrainian industry, and are looking for one window to open. But there are a lot of windows, and you need to know which one to open in each case," Olena Bilousova, co-lead of KSE Institute's defence research centre and one of the report's editors, told the Kyiv Independent on September 22.

The KSE Institute, which earlier this year estimated Ukraine's defence tech market at $6.8bn in 2025, counts Germany as by far the most active partner, accounting for 20% of partnerships (36 cases), followed by Denmark with 10% (18) and the US with 9% (16). Norway and France have 15 each, the UK 13 and the Czech Republic 12. Germany "has chosen a path of funding both the hardware and the knowledge of how that hardware performs in warfare," the report says, gaining new supply chains and access to drone technology while Ukraine gets weapons, investment in joint ventures and "a gateway into the European defence market".

Of all the partnerships identified, a third are active and 22% have stalled, usually at the initial stage. The remaining 45% were signed in the fourth quarter of 2025 or later, too recently to judge. Letters of intent and memorandums frequently lead nowhere, and people working in the field told the authors that such memorandums often serve mainly as publicity. The sector and ownership breakdowns use only active and stalled categories. The report also notes that many drone partnerships are new and their progress remains to be seen; its activity figures should not be read as counts of working factories.

Unmanned systems account for 26% of all partnerships, or 47 projects, and 46 are classified as active. Air defence makes up 17% (30 projects) and artillery and GMLRS systems 10% (18), but only about 63% of air-defence deals are classified as active, with 11 stalled. In those heavier segments cooperation is mostly about maintenance and repair of Western-supplied equipment rather than new production.

"The drone market demonstrates high activity because it operates under the logic of IT service industries and venture capital – featured by fast money, government backing ... and almost instantaneous deployment. Conversely, the air defence and artillery market operates under the logic of conservative heavy industry," the report says.

Some 96% of partnerships with private Ukrainian companies are classified as active (89 of 93), against 62% for state-owned enterprises (43 of 69). Private firms make up about 93% of the Ukrainian companies in the drone segment, while state-owned companies account for 79% in air defence. The authors attribute the gap to private firms fighting for survival and moving "at a startup pace", while state enterprises "are bound by bureaucratic red tape, outdated management practices, and rigid controls" and are less flexible on intellectual property. By type of work, 78% of manufacturing and assembly partnerships are classified as active, as are 72% of repair and sustainment ones. The ownership breakdown excludes some stalled cases where a Ukrainian partner had not yet been identified.

Build in, build with

The report splits Ukraine's industrial cooperation into two tracks. Build in Ukraine, run by the Ministry of Defence, brings foreign companies to produce, repair or co-develop weapons on Ukrainian soil. As of June it involved about 41 foreign companies in 60 partnerships with Ukrainian manufacturers, ranging from signed memorandums to working factories. Repair of Western equipment is the most developed part, and localised production is concentrated in ammunition, components, drones and artillery, while air-defence and armoured-vehicle production "often stays at a memorandum level".

Build with Ukraine works the other way, moving Ukrainian-designed systems into partner countries for joint production, usually under an intergovernmental agreement with the partner paying and early output going to Ukraine's army. It now spans about 41 partnerships in drones, ground robots, missiles, naval systems, electronic warfare, components and air defence, with Denmark, Norway, the Netherlands, Germany and the UK among the countries involved. Examples include Frontline Robotics, which launched drone production in Germany in December 2025 in partnership with Quantum Systems. The venture includes the joint production of Linza drones.

The report treats the Drone Deal as the next stage of Build with Ukraine: a set of government-to-government agreements for parity production and controlled export in which half the output goes to Ukraine's front line and half to the partner's own armed forces. About 20 countries are involved at different stages, with the Netherlands, Latvia, Lithuania and Germany having signed. Latvia signed its Drone Deal in June, and in July Kyiv approved a mechanism for controlled weapons exports under the format. Ukraine has not reopened a normal arms export regime, however, and the authors complain of case-by-case licensing and the lack of predictable legal rules.

The Danish model

Partner states also pay for Ukrainian production directly through three channels. The report rates the Danish-style track, in which a partner finances orders from Ukrainian companies with Ukraine's Defence Procurement Agency as counterparty, as "the most structured and scalable". It raised more than €590mn in 2024, including €175mn from Denmark's own Ukraine fund and €390mn in interest from frozen Russian assets, and about €1.4bn was committed in 2025, €1bn of it from frozen Russian asset revenues channelled by Denmark. Sweden, Norway, Iceland, Canada and Lithuania also use the mechanism.

The Danish model "gives Ukraine the order book to plan around, shortens delivery times for the military, and reduces pressure on the state budget", the report says, though scaling it will need more audit and contract-management capacity. The Hybrid track used by Germany, the Netherlands and Norway, and the Direct track favoured by the US, the UK and Sweden, which deal with manufacturers and even individual brigades, move faster but lack a common method for choosing and monitoring projects and are "less suitable as the main basis for long-term defence-industrial development".

On the multilateral side the report lists the EU's €150bn SAFE joint procurement loans, which Ukrainian companies can now bid into, the €60bn of the Ukraine Support Loan allocated to defence industrial capacity and procurement, and a dedicated €300mn Ukraine Support Instrument within EDIP, alongside Nato's procurement agency and plans to open its DIANA innovation accelerator to Ukraine as its first non-Nato partner.

One front door

The authors blame the stalled deals on a lack of funding, the absence of a single point of contact, unclear rules, thin administrative capacity and weak follow-through on memorandums. Foreign partners often bring their own companies and act as lobbyists for them, creating a risk that the Ukrainian side loses its say over the choice of models, companies and terms of cooperation. Partner governments also increasingly want their own components built into the products they fund, and some deals have run into politics: Poland said in June that the failure of a drone technology deal was blocking a MiG-29 transfer.

"Currently, the partnerships most often emerge because an individual company managed to find a partner at the right time, convinced them and navigated a complex process almost entirely manually and on their own," the report says.

It urges partners to route most state funding through a single coordinated channel on the Danish model, tie orders to validated battlefield demand and fast-track export licences for components in certified joint projects. Kyiv, it says, should create one visible "front door" for partners, add staff to the Defence Procurement Agency, make the official route faster than the workarounds and codify Build with Ukraine in law, which currently rests on a 2003 export control law plus a separate intergovernmental agreement for each project.

"The building blocks of a workable cooperation model already exist. But unless Ukraine and its partners turn them into a clearer, faster and more predictable system, too much cooperation will remain stuck between political announcements and real delivery," the authors conclude.