--- title: "Ukrainian Defense Industry: $60 Billion Potential by End of 2026, but State Orders Cover Only a Third of Capacity" description: "The production capacity of Ukraine's defense industry reached $35 billion per year by the end of 2025 and could grow to $60 billion by 2026. However, state funding covers only a third of the potential, and in the drone segment enterprises are capable of producing up to 8 million units annually without orders for the full volume." date: 2026-08-26T13:10:01.000Z lang: en url: https://xab.info/en/posts/ukrainian-defense-industry-60-billion-potential-state-orders-gap tags: [ukraine-defense-industry, opk, drones-production, state-orders, military-economy, naudii] publisher: "XAB.info" --- # Ukrainian Defense Industry: $60 Billion Potential by End of 2026, but State Orders Cover Only a Third of Capacity ![A soldier carries a Ukrainian reconnaissance drone over his shoulder across a field, illustrating the country's defense industry capacity](https://xab.info/media/2026/08/26/ukrainian-opk-60-billion-potential-state-orders-gap/ukrainian-opk-60-billion-potential-state-orders-gap-1.webp) ## 🎯 Key Points - The production capacity of Ukraine's defense industry reached about $35 billion per year by the end of 2025 and could reach $60 billion by the end of 2026 - Available state funding covers no more than a third of the production potential - Ukrainian enterprises are capable of producing up to 8 million drones a year, but do not have orders for the full volume - 76% of centrally purchased weapons by the end of 2025 were produced at Ukrainian enterprises - Without stable utilization of capacity, enterprises risk degrading and losing competencies According to the RBC-Ukraine special project "Own Weapons β€” the Shield of Independence: How Ukraine Rebuilt Its Defense Industry," by the end of 2025 the production capacity of Ukraine's defense-industrial sector reached approximately $35 billion per year. However, available state funding covered no more than a third of this potential, creating a structural gap between what the factories are capable of producing and what they actually receive in orders. By the end of 2026, analysts estimate, the production capacity of Ukraine's defense industry could grow to $60 billion per year, with more than $35 billion of that amount potentially attributable to the production of long-range weapons. ### Drones: Eight Million a Year Without Guaranteed Demand The sharpest gap between production capacity and state orders is observed in the unmanned systems segment. Ukrainian enterprises are capable of producing up to 8 million drones annually, yet they do not have orders for the full volume. President Volodymyr Zelenskyy estimated that with additional funding, drone production could be increased by another 40%, indicating the existence of "reserve" production potential that remains unused due to budgetary funding constraints. ### 76% of Weapons Are of Domestic Production At the same time, the problem is not reduced to Ukrainian companies' inability to fulfill state orders. As of the end of 2025, 76% of the weapons that the state purchased centrally were already produced at Ukrainian enterprises. This indicates that the defense industry has passed the stage of import substitution and moved into a phase where the key limiting factor is no longer technological competence, but the volume of funding and the clarity of state order mechanisms. ### Risk of Competence Degradation Under Underutilized Capacity Serhiy Pashynskyi, head of the National Association of Ukrainian Manufacturers of Weapons and Military Equipment (NAUDI), emphasizes that capacity created under wartime conditions requires stable utilization. "The problem is only that the enterprises' capacity is loaded to a small percentage of what is possible, and if it is not loaded, it degrades," he notes. Without a sufficient number of orders, enterprises risk losing both production and technological competencies, which in the long term could lead to an irreversible loss of personnel and know-how accumulated over years of wartime production. ### What Is Needed to Develop the Private Defense Industry According to Pashynskyi, further development of the private defense-industrial complex requires clear rules for forming state orders that would allow enterprises to plan investments and production expansion over a multi-year horizon. The absence of long-term, predictable contracts makes it impossible to attract private capital to the industry, since investors cannot assess the return on investment. Thus, the key task for 2026–2027 is not to expand physical capacity, but to create an institutional environment in which production potential is stably utilized through state orders. ## πŸ” Fact-Check Verification - [Private Companies and the Shortage of State Orders: What Is Hindering the Development of the Defense Industry](https://www.rbc.ua/ukr/news/privatni-kompaniyi-ta-brak-derzhzamovlen-1787748969.html) - Основной источник Π΄Π°Π½Π½Ρ‹Ρ…: $35 ΠΌΠ»Ρ€Π΄ мощностСй ΠΊ ΠΊΠΎΠ½Ρ†Ρƒ 2025, проСкция $60 ΠΌΠ»Ρ€Π΄ ΠΊ ΠΊΠΎΠ½Ρ†Ρƒ 2026, 8 ΠΌΠ»Π½ Π΄Ρ€ΠΎΠ½ΠΎΠ², 76% отСчСствСнных Π²ΠΎΠΎΡ€ΡƒΠΆΠ΅Π½ΠΈΠΉ, Ρ†ΠΈΡ‚Π°Ρ‚Π° Пашинского ΠΈΠ· NAUDI, ΠΎΡ†Π΅Π½ΠΊΠ° ЗСлСнского ΠΎ +40% производства Π΄Ρ€ΠΎΠ½ΠΎΠ². - [Ukraine's Defense Industry Grew to $35 Billion in 2025 and Became One of the Most Dynamic in Europe](https://delo.ua/ru/news/ukrainskii-opk-v-2025-godu-vyros-do-35-mlrd-i-stal-odnim-iz-samyx-dinamicnyx-v-evrope-455802/) - ΠŸΠΎΠ΄Ρ‚Π²Π΅Ρ€ΠΆΠ΄Π°Π΅Ρ‚ Ρ„ΠΈΠ³ΡƒΡ€Ρƒ $35 ΠΌΠ»Ρ€Π΄ ΠΊΠ°ΠΊ производствСнный ΠΏΠΎΡ‚Π΅Π½Ρ†ΠΈΠ°Π» ОПК Π² 2025 Π³ΠΎΠ΄Ρƒ ΠΈ Ρ…Π°Ρ€Π°ΠΊΡ‚Π΅Ρ€ΠΈΠ·ΡƒΠ΅Ρ‚ ΠΎΡ‚Ρ€Π°ΡΠ»ΡŒ ΠΊΠ°ΠΊ ΠΎΠ΄Π½Ρƒ ΠΈΠ· самых Π΄ΠΈΠ½Π°ΠΌΠΈΡ‡Π½Ρ‹Ρ… Π² Π•Π²Ρ€ΠΎΠΏΠ΅. ## ❓ FAQ ### Q: What is the production potential of Ukraine's defense industry by the end of 2026? **A:** According to the estimates presented in the RBC-Ukraine special project, by the end of 2026 production capacity could rise to $60 billion per year, of which more than $35 billion may be attributable to the production of long-range weapons. ### Q: How many drones are Ukrainian enterprises capable of producing? **A:** Ukrainian enterprises are capable of producing up to 8 million drones a year, but they do not have state orders for the full volume. President Zelenskyy noted that with additional funding, production could be increased by another 40%. ### Q: What share of weapons in state procurement is produced in Ukraine? **A:** As of the end of 2025, 76% of the weapons that the state purchased centrally were produced by Ukrainian manufacturers. ### Q: What is the main problem of Ukraine's defense industry according to NAUDI? **A:** NAUDI head Serhiy Pashynskyi points out that capacity is loaded to only a small percentage of what is possible, and without stable utilization enterprises risk losing production and technological competencies. Developing the private defense industry requires clear rules for state orders.