Military-Technical Co-operation Between Ukraine and Allied Countries. Potential and Reality

Center for Army, Conversion and Disarmament Studies

NATO Liaison Office in Ukraine

Military-Technical Co-operation Between Ukraine and Allied Countries.Potential and Reality

2014

(Proceedings of the International Conference “Ukraine’s Defence Industry,” Kielce, 3 September 2014)

UKRAINE’S FUTURE SHOULD BE SEEN AS TIGHTLY LINKED TO THE EURO-ATLANTIC SECURITY

MILITARY TECHNICAL COOPERATION WITH WESTERN COMPANIES: MOTIVATION FOR TECHNOLOGICAL SUCCESS

THE RIGHTS TO LIBERTY AND DEMOCRACY REQUIRE EFFECTIVE PROTECTION

DEFENSE-INDUSTRIAL COOPERATION BETWEEN UKRAINE AND THE WEST

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UKRAINE IS EVOLVING INTO A CAPACIOUS MARKET FOR DEFENSE TECHNOLOGY

“UKRAINE’S DEFENSE INDUSTRY” FORUM AT KIELCE

UKRAINIAN-WESTERN MILITARY-TECHNICAL COOPERATION IN AVIATION TECHNOLOGY HOLDS A TREMENDOUS POTENTIAL

UKRAINIAN-WESTERN MILITARY TECHNICAL COOPERATION: NEED FOR NEW RULES APPEALING TO COMPANIES FROM NATO COUNTRIES

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4 UKRAINE’S FUTURE SHOULD BE SEEN AS TIGHTLY LINKED TO THE EURO-ATLANTIC SECURITY

t is a pleasure to introduce to you the policy paper developed based on the speeches and interventions

delivered at the international conference “Ukraine’s defence industry”.

The Conference was initiated by the NATO Liaison Office in order to provide an opportunity for the Ukrainian senior representatives of the defence enterprises to present the potential of Ukraine’s de-fence industry at one of the most impor-tant international defence exhibitions which has acquired and confirmed the status of Europe’s third largest military show.

One of the main goals we envisaged when initiating the conference wasto con-sider possible ways and forms of mutually beneficial projects of military-technical co-operation between Ukraine and Allied countries.

It was important for us to address, in-ter alia, the best practices in and lessons-

learned from reorientation of the defence industries of the Central-Eastern Euro-pean countries to the Western markets as a key component of the post-communist transformation.Such transformations had never been easy for the countries which joined NATO and the EU after the col-lapse of the Warsaw Pact, yet they man-aged to achieve progress in transforming their defence industries. I believe Ukraine is fully capable of taking on that challenge too.

Of course, there are no universal ap-proaches and mechanisms which NATO Allies may offer to Ukraine at a time when it struggles to defend its future and to re-form its security and defence sector while coping with an armed conflict in Donbas and the occupation in the Crimea. How-ever, there are some successful practices in the defence industry reform agenda which may be applied in Ukraine against the background of the on-going security crisis.

UKRAINE’S FUTURE SHOULD BE SEEN AS TIGHTLY LINKED TO THE EURO-ATLANTIC SECURITY

Mr Marcin KozielDirector NATO Liaison Office in Ukraine

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5NATO LIAISON OFFICE IN UKRAINE - CENTER FOR ARMY, CONVERSION AND DISARMAMENT STUDIES

Defence industry transformation in Ukraine should not be considered in isolation to defence and security sector reform and transformation of the Ukrai-nian Armed Forces. Indeed, these pro-cesses are closely linked and a vision for further development of Ukraine’s defence and security sector should, to a large ex-tent, drive the defence industry agenda. The materials of the conference contain a first-hand advice from Allied defence industry practitioners to the Ukrainian governmental officials and top managers of the defence industrial establishments on possible links between defence indus-try development and defence and security sector transformations.

At their meeting held on 1April 2014 NATO and Ukraine Foreign Min-isters decided that NATO and Ukraine will intensify co-operation and pro-mote defence reforms through capac-ity building and capability development programmes. We believe, that defence industry reform and military-technical co-operation will remain one of the key priority for the relations between the Al-liance and Ukraine – a country with a unique defence industry whose future should be seen as tightly linked to the Euro-Atlantic security community a critical component of which are NATO-Ukraine relations.

6 MILITARY TECHNICAL COOPERATION WITH WESTERN COMPANIES: MOTIVATION FOR TECHNOLOGICAL SUCCESS

e are currently witnessing that the political dialogue and practical cooperation between Ukraine and EU

have elevated to a new level. This is no sur-prise, given that Ukraine has declared and systematically pursued European integra-tion as a strategic objective of its foreign policy. Ukrainian government has done a good deal to reestablish confidence and set the conditions for new success stories in defense-industrial and procurement re-lations between Ukraine and EU/NATO states.

It might be noted that Ukraine al-ready has many important partners in Europe. Relations between Ukraine and Poland could be considered a most in-structive, most successful example of partnership thereto. The effort being made by Poland to enhance and expand the scope of cooperation in the military technology area with Western defense companies is for us an important sig-

nal for enhancement and expansion of defense-industrial and procurement relations. Ukraine sincerely shares the values similar to the European values, and it has been working a good deal to implement the European standards. State Holding Company “Ukroboron-prom,» for its part, has worked on the implementation of common standards regarding the development and produc-tion of arms and military equipment (AME).

The Ukrainian military reforms are part and parcel of a strategy of Euro-pean integration among other things. In particular, defense and military-tech-nological policies have in recent years been purposefully pursued as part of an overall concept of regenerating the capa-bilities and enhancing combat readiness status of the Ukrainian Armed Forces. We are planning incremental replace-ment and comprehensive upgrade of So-viet legacy AME inventories, along with

MILITARY TECHNICAL COOPERATION WITH WESTERN COMPANIES: MOTIVATION FOR TECHNOLOGICAL SUCCESS

Roman Romanov,Director General«Ukroboronprom» Ukrainian Defence Industry

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the creation of collaborative initiatives to design and develop advanced AME types.

There are significant changes facing Ukrainian defense industries. Over the duration of the antiterrorism operation in eastern [Ukraine], the defense in-dustries have been able to dramatically increase production rates, upgrade pro-duction facilities and commence work on enhancing Ukraine’s national defense capacity. But what we have now ahead of us is work on technical moderniza-tion of the Armed Forces with most ad-vanced AME types. So we are looking forward to cooperation in technology transfers, and we are set for establishing industrial partnerships to carry out joint projects in high-tech, science-intensive technology areas.

It is foreseen that work on the Ukrainian Armed Forces capability en-hancement will proceed, inter alia, by way of building up the numbers of up-graded and newly built AME types in the Armed Forces arsenal. To this end, we expect a substantial surge in spend-ing on homeland defense, and that up to a quarter of this spending will be for technical modernization projects. This is the first but not the last example of the effort aimed to ensure a credible and robust defense capability in support of peace and stability.

One of indispensable precondi-tions for effective and efficient Armed Forces transformation in as much as it concerns technical modernization is the

availability of a domestic arms industry equipped with high technology pro-duction facilities. To this end, Ukraine has been drawing up and carrying out national programs similar in content to Europe’s. The key outcomes of those programs will be improved capabili-ties of the Ukrainian defense industries in terms of production technologies, R&D and experimental and production bases, and reciprocally this will create a favorable environment for collabora-tion with Western defense companies in the development and co-production of advanced AME types for the benefit of both respective militaries and third-market customers.

We are pleased to note that some of our European counterparts, especially Poland, have leveraged Ukrainian expe-riences in selected areas of the defense industry modernization. Particularly in 2010, Ukrainian government estab-lished a State holding company, the Ukroboronprom, as an association of defense companies dealing with the de-velopment, production and upgrade of arms and military equipment and selling them on the domestic and international markets. To date, Ukroboronprom in-corporates over 130 companies and or-ganizations of the defense industry, em-ploying overall more than 70 000 people. The State Holding Company has under its administration state-owned facto-ries and organizations operating in sec-tors that include aviation, shipbuilding, marine equipment, radar equipment,

8 MILITARY TECHNICAL COOPERATION WITH WESTERN COMPANIES: MOTIVATION FOR TECHNOLOGICAL SUCCESS

air defense, communications, armored military vehicles, artillery rocket and ammunition sectors.

So we were pleased to learn in Sep-tember 2013 that Poland carried out similar measures aimed at defense in-dustry consolidation. We sincerely wel-comed the decision to establish the Pol-ish Armaments Group that incorporates companies such as WZMS, HSW and Polish Defense Holding among other organizations of the defense-industrial sector. The similarities in our strategies make possible a successful consolidation of our defense-industrial capabilities for implementing collaborative projects aimed to bolster national defense capa-bilities of Ukraine and Poland.

We already have a lot to be proud of where the history of our relations in the arms industries is concerned. Authorized arms dealers in Ukraine have been closely engaged with factories and organizations of NATO countries. Most of Ukrainian de-fense and dual-use goods and services ex-ports to NATO countries have recently been comprised of aircraft and armored military vehicles, as well as services related to R&D on precision-guided weapons. There are two key areas where future defense-indus-trial relations between Ukroboronprom and defense companies from NATO states would be most productive:

Technology transfers and implemen-tation of collaborative projects related to R&D and production of a range of new arms and military equipment types. This area is one of most promising in terms

of the new vistas opening for available technology employment, practical imple-mentation of selected defense-industry related concepts of interest, and, finally, cost-cutting effected by means of consoli-dating efforts and investment resources of the partnering countries.

The creation and implementation of collaborative R&D and production proj-ects to jointly produce certain AME types and market them in third-country mar-kets. This could become a very significant defense-industrial cooperation area of mutual benefit for partnering countries. For example, Ukraine proposes a modu-lar approach to upgrading Soviet-built military armored vehicles and air de-fense weapons systems to give customers a selection of upgrade packages meeting specific requirements in terms of fighting capabilities, protection levels and maneu-verability of the tanks and light armored vehicles being upgraded. So we invite our European counterparts to work together in this area.

It should be noted that Ukroboron-prom incorporates a number of compa-nies that make up Ukraine’s extensive infrastructure for AME repair/overhaul. This brings new promises in terms of re-pair/overhaul and upgrade of combat air-craft, integrated aircraft weapon systems, naval vessels and equipment, armored military vehicles, artillery weapons and air defense assets. These capabilities could be leveraged in collaborative projects in different areas. For instance, Ukroboron-prom has been particularly progressive


with respect to overhaul and maintenance of legacy combat aircraft and attack heli-copter types produced in the USSR. This experience could be used for the benefit of partnering countries in future projects.

The Ukroboronprom Holding Com-pany has specific proposals for Western defense companies, aimed to increase the amounts of AME types produced or upgraded under collaborative programs.

We are open to a dialogue and to hearing counterproposals from the Polish side. It is my firm belief that measures such as joint forums and active communication on intentions and potentialities for col-laboration will be very useful in that they will open new ways to cooperation in the military technology area and, also, will facilitate the intensification of economic relations in general.

10 THE RIGHTS TO LIBERTY AND DEMOCRACY REQUIRE EFFECTIVE PROTECTION

ecent developments in Ukraine suggest that the rights to freedom and de-mocracy require effective

protection. This was clearly emphasized at NATO’s recent Wales summit.

Much speculation has swirled both in Ukraine and internationally around the military logistic assistance being pro-vided to Ukraine by Western countries. This assistance is vital, indeed. How-ever it is well known that the Ukrainian defense industry possesses significant R&D and manufacturing capabilities, which could be leveraged for Ukrainian Armed Forces modernization programs and collaborative projects with Western partners.

Held in Kielce, Poland, on 3rd Sep-tember 2014, the “Ukraine Defense Industry” roundtable conference, sup-ported by the NATO Liaison Office in Kyiv and the Ministry of National De-fense of Poland, started a new chapter in

a sincere military-political dialogue and created a new environment for the pro-motion of defense-industrial and pro-curement relations. Furthermore, it will facilitate Ukraine’s effective integration into the European and Euro-Atlantic se-curity structures.

With the intellectual, R&D, techno-logical and manufacturing capabilities of its defense industries, Ukraine holds significant potential for cooperation with NATO member countries in the defense-industrial and procurement areas and converting it into projects of high technological level – such that will fully meet the interests of Ukraine and enable effective collaboration with members of the North Atlantic Alli-ance.

Polish and Ukrainian defense indus-tries already have a range of successful projects in progress. Our countries have travelled similar roads in terms of the de-fense industry transformation – from in-

THE RIGHTS TO LIBERTY AND DEMOCRACY REQUIRE EFFECTIVE PROTECTION

Ihor Kabanenko, Ukraine’s Deputy Minister of Defensein charge of European Integration Affairs (2014)

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dividual entities of the socialist economy to powerful, consolidated businesses. This provides a good environment for finding common ground and understanding.

It should be noted that Ukrainian defense industries have for many years been focused on the production, repair, overhaul and upgrade of the military equipment types left behind from the So-viet years. But the current realities sug-gest a need for an urgent revision of this policy and the formulation of new strat-egies regarding the production of arms and military equipment, where special emphasis will be placed on technological cooperation with international partners. It is understood by experts that Ukraine, assisted by Western companies, has the ability, in the short term, to set up do-mestic production (assembly) lines for the types of tactical equipment required by its Armed Forces (сollimator sights, night viewing devices, thermal imag-ers, unmanned systems etc), as well as current-generation communications and automatic command and control equip-ment. That would be more than a little achievement.

We have to intensify cooperation above all else in the areas where our de-fense industries are most proficient. We can be successful in markets for aircraft and related systems, ships, instruments and apparatus, engines and military ar-mored vehicles. Furthermore, there are yet unexplored but potentially signifi-cant capabilities for cooperation in the areas of aerospace technology and hy-droacoustics.

Overall, a synergy integration of the Ukrainian defense industries’ R&D capabilities and Western defense tech-nology could be highly productive. This all requires the formulation of a well-considered transformation and growth strategy for the domestic defense indus-trial capabilities.

It is my belief that defense industrial and procurement relations, which bring together leading players in the Ukrai-nian and European defense markets, will not be restricted to information ex-change regarding our potential capabili-ties, but will drive the signing of specific contracts and agreements in areas of mutual benefit.

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e are currently witnessing that the political dialogue and practical cooperation between Ukraine and the

European Union have been elevated to a new level. Ukraine has declared and sys-tematically pursued the European integra-tion as a strategic objective of its foreign policy.

The defense sector transformation has been part of the overall European in-tegration package in each of the countries that have reached the end of the path to EU membership. Defense-industrial re-forms across the entire defense-industrial base are an important component of this transformation.

The capabilities of the defense indus-try and of the Armed Forces are key fac-tors of a country’s independence and se-curity. Providing the Armed Forces with current-generation weapons and military equipment types is a critical precondi-tion to successfully creating and operating

modern armed forces adapted to new se-curity environments and modern warfare requirements. The defense industry also plays an important economic role inso-far as it creates jobs and brings revenue through taxes and dividends.

A highly capable defense industry means more financial resources spent on R&D to create state-of-the-art technology that can be utilised for civilian applica-tions. The defense industry has historical-ly been the vanguard of new and innova-tive technology development worldwide. A great number of modern civil technolo-gies that we use every day - vehicles, satel-lite navigation or the Internet – are in ef-fect “by-products” of the development of military technologies.

Unlike in some Western Powers, the concept of the “end of history” and simi-lar myopic ideas have never taken hold in Poland. The political environment in our part of Europe compels us to be realistic. We understand well the need to have a

Defense-industrial Cooperation between Ukraine and the West

Henryk LitwinAmbassador Extraordinary and Plenipotentiary of the Republic of Poland to Ukraine

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strong and competitive defense industry which is also up to date with modern tech-nologies. Poland is one of the few NATO countries that keep their defense spend-ing at the level recommended by the Al-liance (1.95% of the GDP). Moreover, we intend to spend about PLN 140 M (about €33.6M) on military technical moderniza-tion programs by 2022. Not only will these resources strengthen the security of the State, but will also have positive impact on the Polish economy.

Today we can observe that in West-ern Europe the employment rate in the manufacturing sector of the economy is decreasing slowly in favor of services. In many countries the share of the industrial sector in their respective GDP structures has fallen to as low as about 10%. At the be-ginning, we saw it as an inevitable, natural and sometimes even useful phenomenon typical for the globalization process. How-ever, as it turned out to be the case later on, it was the economies endowed with strong industrial sectors that were more effective and efficient in dealing with the difficul-ties of the ongoing crisis, compared with countries with less developed industries or excessively reliant on financial services for GDP generation. The countries that are leading the growth in the European Union have relatively high proportions of industrial sectors in their respective GDP structures, with the most instructive example being Germany, where the it ac-counted for 25% of the country’s GDP for 2013. In Poland, where the crisis has had a relatively soft impact on the economy, that

proportion is slightly smaller and stands at about 24.7%. The defense-industrial sector - a source of new, innovative and life-changing technologies – makes up for a significant portion of the economies with strong industrial bases.

Another overarching trend result-ing from the economic slowdown and the ensuing reduction in defense spending is the consolidation of the defense-industrial base in some EU countries. The establish-ment within the defense industry of strong, integrated organizations with extensive R&D and manufacturing capabilities could serve as a revitalization incentive for the entire economy. This is what we are now witnessing in Poland among other coun-tries. It should be recalled that Ukraine – a member of neither the EU nor NATO – took note of these trends and began to con-solidate its defense-industrial base as well.

Therefore, a consistent technology modernization effort in the defense sec-tor is a necessary process that promises benefits in a variety of areas. The first ob-vious benefit are stronger defense capaci-ties of the country concerned. Poland and Ukraine are among the several countries that fully understand the need to have modern armed forces. Secondly, this con-tributes to the development, proliferation and penetration of cutting-edge technolo-gies into other industries and sectors of the economy. Thirdly, technology mod-ernization strengthens the industrial sec-tor, which is a crucial factor of a country’s military might, economic sustainability and growth.

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In Ukraine, the defense industry is a substantial component of the national economy. The Ukrainian policy of inte-gration with European institutions should therefore also embrace the transforma-tion of its defense-industrial sector and its subsequent immersion into the European economic life. Consistently strong R&D and production capabilities of this sector are what makes it very useful and attrac-tive to both the European partners and Ukraine itself.

In conclusion, it is worth mentioning that Poland, which has now found itself on the frontline of the EU-Russia fallout, possesses a modern defense industry and has gone through a process of reform and restructuring since 1989 which in-cluded the European integration. Efforts aimed at reforming and modernizing the industry are still ongoing (inasmuch as they concern the consolidation of the industrial base) and envisage the ensur-ing of its growth and effective operation in the changing and turbulent immedi-ate environment (considering the ongo-

ing conflict in Ukraine). This experience could be greatly valuable to Ukraine. On the other hand, if we take into account that the “know-how” and technology existing in Poland are to a considerable degree compatible with the industrial technological base in Ukraine (consider-ing the shared Soviet heritage of the two countries), the Polish defense industry reveals itself as a natural partner for its Ukrainian counterpart as the latter em-barks upon the path of reforms, restruc-turisation and European integration. From this perspective, it is encouraging to observe an intensification of bilateral contacts between the defense industries of our two countries. An example thereof was the high-profile presence of Ukrai-nian defense industries at the recent In-ternational Defense Industry Exhibition “MSPO-2014” at Kielce in September 2014. I do believe that these contacts will be growing for the benefit of the indus-tries in both countries, and will result in attracting other European partners to cooperate with the Ukrainian industry.


ussian military aggression against the Ukrainian state has created a new reality that affected inter

alia Ukraine’s relations with NATO. At the recent NATO Wales summit in early September 2014, Ukraine obtained an unprecedented political support, and with it, 28 political allies. It must be noted for that matter that, in addition to closer political integration, a new fair chance has appeared now of bringing defense industrial cooperation to a higher level. Specifically, we are talking about radically new opportunities emerging in areas such as the development of new weapons, collaboration in the upgrade of legacy types of arms and military equipment, and even joint marketing of defense products to third-country customers.

All the preconditions necessary for these new approaches to be effectively implemented are already there. First is the willingness by the Ukrainian government

to play by relevant European rules. Second is quite significant capabilities of the defense industry in Ukraine. Third is that Ukraine, for the first time in its 23 years of existence as an independent nation, has been evolving into a capacious market for defense technology and military products (the domestic defense industry can cater for no more than 40% of the country’s security sector requirements). Fourth and finally, Russia itself is pushing Ukraine closer to cooperation in the defense industrial area with the West. Russian military aggression has become a contributing factor in the termination of defense-industrial collaboration with Moscow. However it was well before the Russian annexation of the Crimea and the start of the confliсt in eastern Ukraine when Russia began actions spearheaded against individual segments of Ukraine’s defense industry. Particularly Russia has been seeking to entice skilled technical professionals in defense technology away

UKRAINE IS EVOLVING INTO A CAPACIOUS MARKET FOR DEFENSE TECHNOLOGY

Valentyn Badrak,Director,


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from Ukraine, and since 1998-1999 it has pursued a policy aimed to phase out procurement of defense products and technology from Ukraine. There was a directive issued by then-President Boris Yeltsin, ordering that Russia attain self-sufficiency in strategic and most critical defense capabilities by phasing out foreign procurements of products and technology relating thereto. At the same time, Ukrainian companies effectively ceased cooperation under Russia’s production programs pertaining to combat aircraft and air defense weapons technologies and equipment. Since 2003, Russia has been very active setting up domestic manufacturing facilities for engines and naval gas turbines – products which it traditionally imported from Ukraine.

Against this background, the Center for Army, Conversion and Disarmament Studies assisted by the NATO Liaison Office in Kyiv and embassies of Central and Eastern European countries (especially Poland) organized and conducted a series of public events and international conferences aimed at promoting confidence-building and creating new defense-industrial cooperation initiatives. A contributing factor was West-friendly government policy that

gave a push-start to long pending projects such as indigenous corvette warship or Mi-24 combat helicopter upgrade. Unfortunately, however, the years under Viktor Yanukovych as president put the clock back for Ukraine’s aspirations regarding international defense-industrial cooperation and exacerbated the level of Russian penetration across the security sector of Ukraine.

The year 2014 brought new opportunities. The key factor is that defense-industrial cooperation with Ukraine is beneficial for Western defense companies. There are officially stated intentions by the Ukraine government regarding the attainment of maximum possible level of integration with European structures and the implementation of comprehensive technical modernization of the Armed Forces and the whole security sector.

So at this time it is solely a consistent effort by Ukraine and the West on which depends whether the significant potential for defense-industrial cooperation will be used to its full capacity. For Ukraine this provides a chance to get rid of reliance on Russia, and for Europe - a chance not to lose Ukraine and make it into a key security partner.


n 3rd September 2014, international round-table conference «Ukraine Defense Industry» took

place with in framework of the international defense-industrial exhibition MSPO 2014 in Kielce, Poland. This conference was an opportune event for Ukrainian defense industry managers to inform potential customers and partners about the country’s defense-industrial capabilities and also to get familiar with the experience of Eastern European states in building their respective defense industrial capabilities after they shook off Soviet influence wielded via the Warsaw Pact Organization. The following is an account of the event by Defense Express.

Background Worsening situation in eastern

Ukraine, resulting in a government embargo on the export of military and dual-use products to Russia, forced Ukrainian defense industries to explore ways to set up and intensify

cooperation with potential partners in the West. Held on the sidelines of international exhibition MSPO-2014 in Kielce, Poland, conference “Ukraine Defense Industry” provided a good chance for Ukrainian defense industries to demonstrate their capabilities to potential partners and to gain some new experiences in defense industrial capacity building.

The event was initiated and supported by the NATO Liaison Office in Kyiv, Embassy of Poland in Ukraine, the Ministry of National Defense of the Republic of Poland and the Center for Army, Conversion and Disarmament Studies, with Poland’s Altair Aviation Agency and Ukraine’s Defense Express performing as information partners.

Speakers to the forum included senior executive officers of the State-owned Ukroboroprom defense industries holding group and of its constituent companies Aviakon, Zoria-Mashproekt, Kharkiv Morozov Machinery Design Bureau, Orizon-Navigation, DKKB Luch

“UKRAINE’S DEFENSE INDUSTRY” FORUM AT KIELCE

Anton Mikhnenko,Editor-in-chief of «Ukrainian Defense Review» Magazine

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Design Bureau, JSC «Motor Sich”, Antonov and Microtech.

Director of the NATO Liaison Office in Ukraine Marcin Koziel, in his opening speech, outlined the purposes of the conference. First is a chance for Ukraine to learn the transformation experience of Central and Eastern Europe in the period after the Soviet collapse. Second is the presentation of Ukraine’s defense-industrial capabilities, «which are really great.» Mr. Koziel noted that NATO regards the defense industry as a key actor in building of the national and overall security architecture. Therefore, in the current conditions, it is critical for Ukraine to develop the capabilities of its domestic defense industry because of its importance as a part of state policy in national security.

One thing that became particularly evident during the conference was genuine willingness shown by Ukrainian defense industry officials to forge relations with Western partners, as well as their openness to dialogue and integration aspirations. It may be fairly presumed that this obvious interest might be because the military-political authorities in Ukraine well realize the need for modernization of the Armed Forces to current standards – a task which is obviously beyond the capabilities of the domestic defense industry alone.

At the start of the event, CEO of Ukroboronprom, Roman Romanov outlined key highlights for discussion. The year 2014 saw the political dialogue and practical cooperation between Ukraine

and the EU entering a new level of quality – an outcome of Ukraine’s strategy of European integration, Romanov said. Assessing the progress of military reform in Ukraine, he called it «the material and technical basis for the national defense industry transformation.» He saying that for the defense industry transformation to be progressing in a rational, effective way, Ukraine needs to learn the European integration experiences of countries such as Poland. An important message made by the CEO of Ukroboronprom for potential partners was that the Company’s strategic objectives are the transition to NATO standardization and effective modernization of the country’s Armed Forces. Romanov specified potential areas of cooperation with European partners, which include helicopter upgrades as well as co-development and production of radar technologies, rocket artillery systems, military armored vehicles, engines, explosive reactive armor systems and active protection systems for armored vehicle applications. He also noted the great potential for cooperation between Polish and Ukrainian companies in sectors such as ammunition, shipbuilding and defense electronics.

Likewisely, willingness of a large-scale cooperation was expressed officially by Janusz Onyszkiewicz, an advisor to the Polish Minister of National Defense. He particularly said that Ukraine is a strategic partner to his country, and close relations could help to build a framework for facilitating the development of a strategic


security environment for both of the nations. He also emphasized the need for Poland to revitalize the capabilities of its domestic defense industry and bring itself back to the top ten arms exporters, as was the case in the 1980s when Poland was ranked 7th in the world. At the moment, 90% of the Polish defense industry output is geared towards the domestic market, which Mr. Onyszkiewicz believes to be “not a healthy situation”. This must be changed, and support must be given to the country’s export market potential among other things.

For his part, Valentyn Badrak, Director of the Center for Army, Conversion and Disarmament Studies noted that Ukraine has been given a second chance now for development of cooperation with Western partners. In particular, he said: «A range of promising collaborative projects with leading global manufacturers emerged following the 2004 “orange” revolution. Ukrainian naval warship designers assisted by NATO experts carried out a joint project pertaining to defense. Since that time, a number of projects involving the export of military equipment from Ukraine have been implemented for the benefit of a range of countries that particularly included Greece, Macedonia, Poland, the Czech Republic, Belgium and the USA. There also have been collaborative projects with European partners, aimed at meeting the Ukraine Armed Forces’ requirement for naval corvette warships. Unfortunately, however, these initiatives

have not led to development of joint capabilities or potentialities. Today, Ukraine has got a second chance which must not be missed. What is required for this chance to be materialized is not only our will, but understanding on the part of our partners, as well. More confidence, more openness and more opportunities are needed so that there are more success stories in the future», Mr Badrak said.

The roundtable conference was held in two panels. One panel, dominated by European experts, was dealing with the specifics and experiences of defense industry transformation in Eastern Europe.

A speech delivered by Tomas Kopecny, an advisor to a deputy Minister of Defense of the Czech Republic, was particularly useful for understanding the problems and possible ways of national defense industry transformation in Ukraine. In his address, Mr. Kopecny highlighted several aspects of the Czech Republic’s defense industry capability building relevant to understanding of the subject matter, with some of which Ukraine had experience once before.

First is the awareness of the need to «civilinize» the defense industry. In absence of military threats, the Czechs converted their defense industry for the production of dual-use technology. In this case, the decision was taken at the Government level. However, the Government failed to support this strategy with adequate programs and concepts, the result being that a great number of


defense industrial giants were effectively brought to collapse.

Second is the need for privatization. In the Czech Republic, unlike in Poland and many other European countries, almost none of state-owned and state-run entities were left in the defense sector of the economy. The Government began to rely solely on the capabilities of the private sector for military production and other national defense requirements. This didn’t just led to fragmentation of the defense industry, but also affected management culture and practices. Regarding the profit-oriented nature of the private sector, a new nature of the relationship emerged, giving birth to new issues and concerns, this time at the strategic level.

Third is the impact of globalization and internationalization of the defense industry. The industry was fragmented and beyond the scope of government control. Therefore defense companies found themselves in a situation where they had to search own ways to survive. This brought about an aspect specific for small countries like the Czech Republic such as a great emphasis placed on specialization. The country began search for areas of expertise where it could show itself to best advantage. So the Czechs fixed on passive surveillance, radar technology, training aircraft, cyber technology and demilitarization as key sectors of their defense industry.

Fourth is the Czech Republic’s ambition to reduce reliance on Russia. In fact, it succeeded in this effort, helicopters

remaining the only product group where reducing reliance on Russia is still high on the agenda.

Some interesting comments came from Ruben Johnson (Janes Defense Weekly). He actually affirmed Tomas Kopecny’s remarks regarding specific aspects of defense industry transformation in Eastern and South-Eastern Europe, but focused on some of the problematic issues and possible solutions.

Mr. Johnson said that the countries in the region, including Ukraine, are spending too little on defense (except for Poland). Funding for R&D is an issue of particular concern. Some governments still believe that it is the military who should pay for R&D, while others consider that the armed forces should just buy armaments. In his view, this is an issue which slows down progress. As an example of good practice, he cited the United States, where R&D budgets are generous. That this approach is correct is confirmed by the fact that the United States is the source country of almost 80% of all new technologies in the world. R&D budgets should be raised in all countries, because this is an investment in the future. Some suppliers are still focused on how to upgrade legacy technologies rather than to produce new ones, which is why defense industries in many countries cannot be competitive in the global marketplace in current conditions, Ruben Johnson said.

With this in view, it is necessary today to increase the number of collaborative programs implemented on multinational


levels. In this case, it is crucial that each country in the Region be given its own place in such programs. By incorporating American or Western components in their products, defense industries in the Region would expand their business horizons and benefit from access to new technology, Mr. Johnson went on to note.

He furthermore pointed to one more important factor in the defense industry transformation, which is an upgrade of the export process. In his opinion, there should be export opportunities provided for each and all of former Warsaw Pact countries. It is necessary to adopt new antitrust legislations and set up a variety of discussion groups for members of the industry, government, etc., and thus provide a platform for dialogue and finding common ground.

In his address to the panel, Wojciech Łuczak, Vice President of «Altair» Aviation Agency, Poland, highlighted the dramatic situation in Ukraine. The country has to look for a new future as military conflict is ongoing in the Donbas, in a situation where most of Ukraine’s defense-industrial interests have been traditionally closely related with Russia. «I well understand how difficult the situation is for [our] Ukrainian counterparts. It is necessary for Ukraine now to find a way to fully re-orient itself, leveraging the experiences of the countries that passed almost the same way. Poland has an extensive work experience with the European Union, and we are seeking to help the Ukrainians. A new identity, a new

national self-determination are necessary. In this case, an aspect that matters is the [high] level of culture and openness in Ukraine», said Wojciech Łuczak.

Ukrainian defense industry capabilities

Ukraine is one of few countries in the world that maintain self-sufficiency in the production of aircraft and related systems, most notably regional passenger planes, transport aircraft and military cargo airlifters, as well as aircraft engines and assemblies and avionics equipment compatible with space-based satellite communication, navigation and surveillance. The country has an extensive experience in the construction of naval warships and civilian vessels for various purposes, and enjoys self-sufficiency in the production of current-generation tanks and armored personnel carrier vehicles (with the proportion of imported components not exceeding 2…5 percent), armored military vehicles, armored transport vehicles, military trucks, armored cars and military engineering vehicles. Moreover, Ukraine is among the ten countries in the world that are able to develop and produce rockets and missile systems, radar equipment and precision-guided munitions. Ukraine is a leading global player in the production of gas-turbine engines for electric energy industry and gas pipeline applications.

The other panel of the Kielce conference was focused around these


defense industrial capabilities represented by world renowned and title Ukrainian companies already known to European customers.

The highlight of the panel was the discussion on achievements of State Company Antonov, led by Oleh Bohdanov, deputy CEO of the Company. Mr Bohdanov focused his address on key defense-related projects currently underway with Antonov. These include the official qualification trials of the An-188/An-70 transport aircraft and the development of new aircraft types, including the An-148T transport aircraft with a loading ramp, the An-178 military transport aircraft, the An-148-300MR base patrol aircraft and the An-132 aircraft equipped with Pratt & Whitney engines. Special discussions were held on possible options for upgrading the light multipurpose aircraft An-28, which was commercially produced in Poland by PZL Mielec factory, and expanding the scope of cooperation by creating the An-38K –the next-generation configuration of this aircraft.

Volodymyr Semenov, Director of Corporate Rights and Investment at JSC «Motor Sich», made a presentation of a series of projects on re-engining upgrade of the Mil family of helicopters, with the emphasis placed on upgrading the Polish-built PZL W-3 Sokół helicopters with more capable Motor-Sich MS-500V-03 engines, and a demonstration of capabilities and different configurations of the MSB-2 helicopter powered by the AI-

450M engine. The re-engined upgrades provide a range of advantages that include, inter alia, a speedier climb rate, a wider operating temperature range and longer service life.

Part of the discussion was dedicated to products by State Company “Microtech”. Director of Foreign Economic Relations, Oleksandr Mudryk demonstrated some samples of very unique protective systems for armored military vehicle applications, among them the new-generation explosive reactive armor (ERA) plates “Nizh”, anti-tandem ERA panels «Duplet» and active protection systems “Zaslin” and “Shershen”. The Polish party has already expressed an interest in cooperation with Microtech regarding joint development of active protection technologies.

Equally interesting was the presentation made by State Company «Aviakon.» Deputy Chief Engineer, Andriy Vasylenko focused his speech on the Company’s capabilities in rebuilding/upgrade and overhaul of the Mil series of helicopters. The Company has already gained work experience with organizations such as Sagem and Paramount, and is now seeking partnerships with new international counterparts.

State Company “Zoria-Mashproekt” is Ukraine’s premier manufacturer of marine gas-turbine engines for naval applications. The Company made a presentation of a broad range of gas-turbine engines that are used worldwide in surface ships of various types, including the UGT-16000 that


was adopted for the Berkut-class missile cruiser, the UGT-15000 (the Gepard-class and Yastreb-class naval frigates) and the UGT-6000 (the Molniya-class naval corvette and the Burevestnik-class naval frigate). A great deal of Zoria-Mashproekt turbines are very successful on export markets, most notably in India, Russia, China, Vietnam and other countries. The Company is currently exploring ways to markets in Europe in order to command a more visible presence in the Region, as there are all the necessary preconditions for this to happen.

A presentation of Ukraine’s armored vehicle industry capabilities was made by Volodymyr Zoryanov of Kharkiv’s Morozov Machinery Design Bureau. Mr Zoryanov, in his speech, placed a special emphasis on the Company’s engagement with armored vehicle manufacturers in Europe. For now, Morozov has a plethora of successful armored military vehicle designs such as the Bulat, Oplot and Yatagan MBTs, the BTR-4 APC in various configurations and the Dozor-B armored troop carrier vehicle. The experience gained by the Company during its years of existence could be leveraged to develop and build new armored vehicle types for the benefit of both the Ukrainian Armed Forces and third-country markets.

State Company “DKKB Luch”, a most experienced company in terms of cooperation with European partners, was spoken for at the event by Mykola Kachayev, deputy CEO/Chief Designer. He focused his speech on the resources

and capabilities available to DKKB Luch. The Company has already achieved much progress in developing precision-guided weapons, Mr. Kachayev said. Luch has developed a family of guided munitions in 152mm, 130mm, 125mm, 120mm, 105mm, 100mm and 90mm calibers. Designed to be launched from aircraft and naval platforms, they could also be used for increasing armored vehicles’ firepower. The weapons are all armed with tandem-charge HEAT warheads to enable improved first-hit probabilities against targets protected with composite armor, spaced armor or monolithic armor (including armors shielded by ERA).

However, despite the fact that most of components and subassemblies used by the Company in developing new weapons types are of the Ukrainian origin, DKKB Luch is seeking greater international cooperation in carrying multinational projects. Thus, for example, new gun-launched ATGW missiles Falarick 90, Falarick 105 and Falarick 120 have been developed by Luch under collaborative programs with CMI Defence (a company incorporated with CMI (Cockerill Maintenance & Ingenierie) group). Luch is also seeking to employ its precision-guided rounds in a Polish self-propelled mortar project, with a potential result being the creation of a series of highly capable multi-target weapon systems that would meet the requirements of today and tomorrow.

Achievements by State Company “Orizon-Navigation» generated a really


high level of interest on the part of the panel. Demonstrated by deputy Chief Designer, Anatoliy Vodianykh, an Orizon-Navigation’s Global Navigation Satellite System (GNSS) receiver is distinguishable by capability to accept GNSS signals from multiple systems – U.S.’ GPS, Russia’s GLONASS and, eventually, EU’s GALLILEO and PRC’s COMPASS, as well as their related augmentation systems – the EU’s EGNOS, U.S. WAAS and Japan’s MSAS. Orizon-Navigation has developed and brought into production over five dozen equipment designs for individual navigation satellite system users and for different platforms – aerial, seaborne and ground-based. The Company has its products sold well both on the domestic and CIS marketplaces, but it is seeking cooperation with European partners, aimed to facilitate technology development and the opening of new markets.

Afterword Indeed, by demonstrating the

products of the companies as mentioned above, Ukraine meant to display its willingness to cooperate, and also its potentialities and capabilities. Ukraine must work to ensure the introduction of new processes and technologies and the incorporation of the technologies into time proven practices. Until this is done, it will not be able to keep its place in the global market and to advance further. One of the ways to achieving this goal lies in the intensification

of relations with potential European partners. Clear-cut remarks on that issue were delivered during the first panel meeting by Oleh Uruski, a deputy CEO of Ukroboronprom. «Certain ‘tactical’ objectives of defense industrial and procurement relations between Ukraine and the European Union could be accomplished by means of intensifying defense-industrial relations with Central and Eastern European (CEE) countries, whose Armed Forces keep inventories of arms and military equipment types that were either Soviet designed or manufactured domestically under Soviet licenses. Ukraine has a great deal of experience upgrading arms and military equipment (AME), including projects aimed at bringing them closer to NATO compliance, and it also has the necessary technological and industrial capabilities and processes of the national technology and industrial base. CEE countries can boast having similar experiences. That said, Ukraine could offer NATO countries in the Region cooperation aimed at overhaul and upgrade of AME for the benefit of own Armed Forces or the export of surplus AME inventories to third-country markets. It also could carry out defense-related R&D and production of latest generation technologies under collaborative programs [with CEE countries]”, said Mr. Uruski.

Therefore, experts judge that Ukraine needs to take several actions in pursuit


of its strategic objective of European integration pertaining to defense industrial and procurement relations:

• Initially focus on life extension and upgrade of legacy AME types. Where there is need to replace the products that were previously exported from Russia, use new components and subassemblies that will be produced domestically or imported from EU suppliers;

• Ensure to the greatest possible extent that AME types are developed, produced, overhauled and upgraded under collaborative programs with foreign countries, most notably EU/NATO members. This collaboration should include technology transfers and the transfer of production lines to factories in Ukraine;

• Aggressively pursue: the Armed Forces modernization to NATO compliance, technical modernization of domestic defense industries and their participation as full- fledged partners in NATO’s «smart defense» and EU’s «pulling & sharing» initiatives.

These are all attainable objectives considering the availability in Ukraine of high-tech production capabilities and skilled workforce, significant potential for the development and production of unique science-intensive

products with potentially high export capacity, and well-developed repair and overhaul infrastructures which, driven by export contracts, have been growing extensively in recent years .

Hurdles that can slow down or impede defense industrial and procurement relations between Ukrainian and European defense companies are the lack of appropriate and effective legal and regulatory framework for offset contracting in defense and security procurements, as well as prohibitively slow rate of corporatization and privatization of the domestic defense industries, coupled with the rapid aging of production assets. Finally, this is the lack of a single government coordinator of the national defense industry, who could be put in charge of awarding government defense procurement contracts and procurement of imported military products. Another potential hazard lies in the fact that Western defense suppliers would sell fully integrated finished solutions rather than the process itself. Considering the size and capabilities of the Ukrainian defense industry and Ukraine’s standing in the world arms market, a more rational approach would be for Western partners to establish joint ventures and industrial partnerships, create attractive investment and industrial offset opportunities, and give Ukrainian defense industries a workshare in the production of


components and subsystems of the AME types slated for induction into the Armed Forces of Ukraine.

The “Ukraine Defense Industry” round-table conference at Kielce is an event which marks an important

milestone in the Ukrainian defense industry’s transformation. There remains a good deal of work to be done, and Ukraine can succeed given political will, a strive for a change and understanding on the part of its Western partners.


UKRAINIAN-WESTERN MILITARY-TECHNICAL COOPERATION IN AVIATION TECHNOLOGY

HOLDS A TREMENDOUS POTENTIAL

Dmytro Kiva,President/Chief Designer,

State Company «Antonov»

State Company «Antonov» is Ukraine’s top designer and manufacturer of aircraft. The Company is

a specialist in the design, development and manufacture of military transport aircraft, patrol airplanes and headquarters aircraft among other aircraft types. With its robust R&D and manufacturing capabilities, Antonov is well equipped to manage and maintain the full lifecycle of military and dual-use airplanes - from the R&D, designing, manufacturing and testing to production, after-sales service support and upgrade. The Antonov Company is also dealing with the design and development of current-generation landing gear equipment and full flight simulator systems of the highest current Level D standard, and its aircraft designs make extensive use of composite materials.

The modern aviation industry in Ukraine has until recently remained a largerly export-oriented industry. For

this reason, international cooperation, in particular, in the military technology area, is an indispensable and extremely important component of the industry’s development strategy. With its extensive system of relations with companies and organizations in 16 countries of the Western world, Antonov is willing to forge and intensify its military technical cooperation with Western defense companies. All the necessary preconditions for this to happen are already there. Thus, in terms of its structural organization, Antonov is not too much dissimilar from counterpart companies in the West. The Company has all the organizational units necessary to sustain a full cycle of making an aircraft: a R&D unit, a pilot factory, a Flight Test Center and an assembly-line production facility. It should be noted that Antonov makes an extensive use of computer-assisted design techniques, the latest scientific achievements and advanced

28 UKRAINIAN-WESTERN MILITARY-TECHNICAL COOPERATION IN AVIATION TECHNOLOGY HOLDS A TREMENDOUS POTENTIAL

technology. To date, Antonov has 10 R&D projects that could be considered part of national heritage, and it conducts over two hundred scientific studies annually. I just have to add on this that Antonov has years of experience in the aviation technology development area, and during its 68 year of existence, the Company has built over 22,000 airplanes of more than 100 types and mission-specific configurations, of which 5,030 airplanes are currently in operation in 78 countries worldwide. A significant number of these airplanes are employed for military and dual-use operations.

The Company is currently building production aircraft An-140-100, An-148-100, An-158, An-74 and An-32 – for customers that include various international institutions of the security sector.

Antonov is now working on the design and development of a number of new aircraft types and derivative configurations, including the An-70/An-188, An-178, An-124-121/-200, An-148-300, An-132 and An-2-100. These are all designed for different roles and will be offered to both military and commercial customers.

The Company is seeking greater international cooperation in areas as follows:

• in-service support (and maintenance) of the Antonov airplanes;

• design and development of new Antonov aircraft types under

collaborative programs with international partners in 15 countries;

• participation in international aircraft industry programs;

• provision of international air freight services.

The Company’s cooperation in military technology is focused on the design/development and production of special-capability airplanes and military transport aircraft. In this context, I should emphasize that Antonov is open to modern trends and patterns of military-technical cooperation that may include technology transfers, setting up production lines in aircraft operators’ countries and equipping Antonov aircraft with Western-made subsystems, components and accessories, including engines. Regarding the transfer of manufacturing technology and techniques, we would be ready to consider options involving the transfer of 50% or even 70% of manufacturing (depending on specific aircraft type) to foreign factories. It should be noted that, in pursuit of its military-technical cooperation strategy regarding NATO states, Antonov has launched a collaborative project with Turkey, which, as is also the case with fruitful cooperation with Saudi Arabia, includes the use of Western-made engines. Antonov has a significant experience working with Polish partners, and this could be leveraged in a joint upgrade of the M-28 aircraft.

The following is a short description of the projects currently in progress with


Antonov regarding the development of new aircraft types and upgrade of legacy designs.

An-70 – medium-lift military transport aircraft. An aircraft with unique operating parameters, the An-70 has become hostage to political tensions. Despite Russia’s deliberate sluggish attitude toward the An-70 development program in 2009-2012, Antonov has been able to drastically improve the design of the aircraft and bring its flight-test program to completion in 2014. With successful completion of official trials, the An-70 is now ready for the production stage, which requires government decisions in conditions of ongoing military confrontation with the Russian Federation.

Antonov expects that the An-70 is going to sell well due to its unique technical performances. For potential customers, Antonov offers the creation of the An-188, a new medium-lift military transport aircraft based on the An-70 platform but equipped with avionics equipment of Ukrainian and Western manufacture. In terms of its cargo lifting capacity, the An-188 will occupy a niche in between the medium-lift transport aircraft C-130J-30 and the heavy airlifter C-17A.

The An-188 will provide considerable advantages over its closest same-size rival – the A400M. When operated from a 915-m long runway particularly, it will be able to deliver a 20t payload to 40 percent longer range than the A400M, and a 37t payload (which is the max payload capacity of

the A400M) to 11 percent longer range (of 300 km) than the A400M. Moreover, the An-188 will be capable of payloads up to 40 tons, as compared to 37 tons for the A400M. Antonov is ready to consider different options for the An-188 regarding customer-specific configurations and equipment fits.

Another heavy-lift aircraft, the An-124 has been subject to continuous improvement to its performance. New versions of the aircraft with improved technical performances and economic benefits have been developed, named An-124-100M, An-124-100-150 and An-124-100M-150. In particular, max payload capacity has been increased to 150 tons and single-piece payload capacity to 120 tons, and the crew has been reduced to four among other improvements. I would like to specially emphasize that the An-124 upgrade includes 80 percent service life extension, which would enable the airplane to remain operational for an additional period up to 2037-2040. Moreover, the An-124 “Ruslan” airplanes have been extensively employed in the Strategic Airlift Interim Solution (SALIS) program providing air transportation services to 16 NATO/EU customer countries. The An-124 airlifter and the An-225, the world’s heaviest transport aircraft, played a key role in the counter-terrorism operation Serval in Mali during January-March 2013. A comprehensive upgrade of the An-124 aircraft is planned to include engines and avionics equipment of Western manufacture.


The development of the An-148 family of short-range passenger airliners and medium-payload cargo airplanes An-178 is example of an excellent investment/outcome ratio project. Furthermore, importantly, the underlying concept of the An-148/178 aircraft design and a high level of parts interchangeability enable a flexible and rapid response to specific customer requirements. Thus, for example, Antonov has developed the An-148-300 – a configuration of the An-148 optimized for patrol missions. Furthermore, the An-148/-158 series airplanes had their high-altitude takeoff/landing capability tested and qualified by Bolivia earlier this year.

The An-148/178 family of aircraft includes three militarized configurations:

• An-148-300MR - maritime patrol aircraft with a capability to counter maritime border threats;

• An-148T – light military cargo jet with a loading ramp;

• An-178 – medium-payload military cargo jet with a loading ramp.

The An-178 is one of the key priority programs for Antonov, completion of construction of the first prototype being scheduled for the beginning of 2015. The An-178 is being proposed as a higher-tech replacement for the medium-payload cargo turboprop aircraft An-12 (over 1,400 units of the aircraft were produced during its production run), as well as Europe’s twin-engine cargo turboprop aircraft C-160 (214 units were produced). We expect that the new aircraft will sell at

a much lower price than medium-payload counterparts such as the C-130J or the KC-390, and will be in approximately the same price range as light cargo airplanes such as the C-295 or C-27J, while being far superior in performance and transport efficiency terms.

Another area of focus for Antonov is upgrade of legacy types of aircraft in order to keep the aircraft types in production and to offer them to potential customers.

First is the An-74 – a light military cargo jet with a loading ramp, which is currently undergoing performance improvements with the addition of new configurations developed based on this proven platform.

Second is the An-32 – a light turboprop multi-purpose cargo airplane (six such airplanes have recently been exported to the Iraq Air Force). An-32s in the Indian Air Force are now undergoing upgrade to the more capable An-32RE configuration.

Replacement of legacy aircraft with more current generation platforms is the necessary prerequisite to maintain competitive ability in the global market for light turboprop military cargo aircraft with loading ramps. Antonov proposes solutions for two types of aircraft in this niche market.

One is the An-132 – a light multi-purpose turboprop cargo aircraft being developed to replace the An-32, which is renowned for its unique operating capabilities in high temperature/high altitude environments. The An-132 will


feature Pratt & Whitney Canada PW-150A engines and avionics equipment from suppliers in Canada, USA and the European Union. With cargo carrying capacity of 9.2 tons, the An-132 will be able to deliver payloads to a maximum range twice as long as that of the An-32. The An-132 was aimed at possible Indian Air Force requirement for 56 light cargo airplanes to replace the legacy AVRO HS-748 fleet, and it is also being offered to potential customers in the Middle East, Asia, Africa and South America.

For markets requiring lighter weight aircraft, Antonov offers the An-140T – a new cargo turboprop designed to replace the legacy An-26 twin-engine turboprop.

Being a strong actor in the heavy cargo aircraft market, Antonov has something to offer the market for lighter aircraft, as well. I am talking about the multi-purpose turboprop airplanes An-28-100 and An-38-120, as well as re-engining upgrade of the multipurpose aircraft An-2 to the An-2-100 standard.

To date, Antonov is the only company in the world capable of producing the complete range of cargo airplanes – ranging from the light An-2-100 capable of payloads up to 1.5 tons to the super heavyweight, 150-ton payload aircraft An-124-100M-150. All of the Antonov airplanes are the subjects of industrial cooperation and could be offered as subjects of military-technical cooperation programs.

A special mention should be made about the design/development and

production engineering of promising types of unmanned aircraft systems (UAS) – an innovative and complex technology area which has assumed special significance for Ukraine now. Antonov is currently extensively involved in programs to develop promising indigenous UAS designs. It should be noted that the Company is no stranger to the UAV development domain. Particularly in 1975-1981, Antonov was the first in the USSR to design, develop and build a remotely controlled optical (TV) reconnaissance UAS with a live video footage transmission capability. The UAS consisted of an unmanned aircraft, mission sensor system, specialized datalink and ground control station.

Development of a current-generation UAS design is a complex endeavor that integrates the following aspects:

• identification of operational requirements and definition of priorities for future-generation indigenous UAS designs;

• R&D on future-generation indigenous UAS designs;

• testing and maturation of UAS designs;

• production engineering, selection of equipment manufacturers and their subcontractors;

• induction into service, after-sales service support.

To be able to develop and field a modern UAS that would be as good as top foreign competitors, one requires to have extensive practical work experience


thereto, advanced R&D and manufacturing capabilities, as well as an extensive after-sales service network – and this all is what Antonov does have. The Company also has experience as system integrator in UAS systems, which is particularly valuable given the complex construction of a modern UAS that includes a great variety of different-purpose sub-systems and components supplied by different manufacturers.

In addition to this, Antonov is exploring the possibility to create a combat-capable trainer aircraft. The Company believes that such a project is well within the scope of its expertise and competence.

It might be emphasized that Ukraine itself is now evolving into a capacious market for defense technology, given its plans and intentions regarding technical modernization of the Armed Forces and other security sector institutions. To this end, the domestic defense industries will require most advanced Western technology, which could be obtained, inter alia, via bilateral technology transfers or the exchange of technical ideas. State Company “Antonov” is open to military technical cooperation, both for the benefit of Ukraine and customer states, or – where this cooperation is conducted with Western companies – for the benefit of third countries.


UKRAINIAN-WESTERN MILITARY TECHNICAL COOPERATION: NEED FOR NEW RULES APPEALING TO COMPANIES FROM NATO COUNTYES

Valentyn Badrak,Director,


Ukraine has more than 15 years of experience of defense-industrial and procurement relations

with NATO and EU countries. However, it is to be said that experience of cooperation thereto with European partners has for a long time been percepted controversially by defense industry managers in Ukraine. Specifically in 1997, a tri-national Franco-Czech-Ukrainian project was launched to upgrade the T-72 main battle tank (MBT) to the more capable T-72AG standard for the benefit of third-country customers. Also in the mid-1990s, Ukrainian designers were working with NATO counterparts exploring ways to improve fire safety of naval “corvette” warships. Since then, Ukrainian military vehicle manufacturers competed in contract bids in Turkey and Greece, and Ukraine

was trying to push its Antonov An-70 airplane into the European market for use as a prototype platform on which to develop a future military transport aircraft for NATO. However, all these endeavors proved unsuccessful, not least because of a lack of mutual confidence, adverse Russian influence and ignorance of the partners’ rules of the game.

However, Ukrainian-Western military technical cooperation (MTC) is not as unsuccessful as it might immediately seem. Despite the current difficulties, Ukraine began both the export of ready-made arms and military equipment (AME) systems and the implementation of collaborative R&D and production programs with Western partners, this being largely due to a great deal of initiative on the part of factory managers. Ukrainian defense products and technology have

34 UKRAINIAN-WESTERN MILITARY TECHNICAL COOPERATION: NEED FOR NEW RULES APPEALING TO COMPANIES FROM NATO COUNTYES

been gradually making their way to Western markets such as Greece (the landing craft air cushion vehicles ‘Bison’), Macedonia (overhauled ex-Soviet military equipment), Poland (armored vehicle protection systems and precision-guided weapons), and, later, the United States (protective equipment for armored vehicles) and Belgium (precision-guided weapons). There were also collaborative projects conducted with European partners for the benefit of the Ukrainian Armed Forces. Most positive work experience in the MTC area has been with Poland, and this experience is encouraging. Among most visible achievements are: collaborative R&D on precision-guided weapons, air defense technology and armored military vehicles; Poland’s purchase of production license for the armored vehicle “Dozor”; the beginning of work to formulate new concepts regarding R&D/design of unmanned aircraft systems and upgrade of aircraft technology. Indeed, this has been made possible not least due to the more extensive political dialogue and successful collaborative efforts in dual-use technology areas such as aerospace and the employment of Ukraine’s military transports for air transportation of NATO’s military personnel and supplies.

Most importantly, Ukraine has begun to leverage the experience of the Western world and is gradually transitioning to NATO standards,

which have become the dominant standards worldwide. It was back in the early 2000s when Ukrainian defense industries created successful weapons designs such as the Yatagan MBT, the Kvitnyk family of precision-guided gun-launched projectiles, the Falarick family of tank gun launched missiles, as well as protective equipment for armored vehicles and helicopters – all built to conform to NATO’s compatibility requirements.

The leveraged experience of NATO/EU countries suggest that military-technical policy should be regarded as a most important instrument of the State military strategy, as a system of far-sighted, scientifically grounded views on the development of arms and the national defense industrial capacities. It has been pursued as a means of support not only for the transformation of the Armed Forces into a modern, well-armed and trained fighting force, but also for the generation of scientific ideas and AME designs, and it is a source of input data for planning of the defense industry’s growth and defense procurement spending. That is on what the Ukrainian defense industry managers based their strategies. Real changes were slow to occur, but they did happen.

What is critically important is that Ukraine has finally come to understand the need for technical modernization of its national Armed Forces to current standards, and that this task is obviously


beyond the capabilities of the domestic defense industry alone.

It should be noted that initial significant changes in approaches to how Ukraine’s defense industries should grow occurred in 2008–2009, the period that saw the start of important programs such as the Ukrainian Mi-24 combat helicopter upgrade assisted by SAGEM of France, and the indigenous naval corvette warship that is foreseen to incorporate about 38% of components and subsystems of the Western manufacture, with potential suppliers in France, the Netherlands and Germany among other countries of the Western world. However, it took good two years of intensive negotiations for Ukraine to get formal approval for such cooperation from governments of France, Italy and Switzerland. In the long run, subcontracts were awarded to 35 contractors, and overall level of mutual confidence has increased significantly.

Significant changes also occurred within the Ukrainian defense industry. Whereas it was once able to produce from 8% to 12% of the range of the AME types required by the domestic Armed Forces (by varying estimates up and down), this level has now risen to 30-35%, according to CACDS figures, thanks largely to the emergence and growth of brand new R&D schools of thought, most particularly on light armored vehicles, protection against precision based attacks and precision-

guided weapons just to name a few. There is a great growth potential in the Ukrainian defense industry that could increase its share in the provision of the country’s military requirements to 60% or even 70%, given that there is in place a sustained and effective policy of Western defense technology insertion. Indeed, the Ukrainian defense industry could obtain a fresh impetus to expand and enhance its capacity to cater for homeland defense requirements through diversification of foreign sources of defense technology and manufactured products required by the country’s military establishment. Therefore, technical modernization of the Ukrainian Armed Forces and other security sector institutions with current-generation AME types, with an emphasis placed on leading-edge technology of primarily Western origin, is becoming a near-term priority.

It should be emphasized that, with the launch of the Kremlin’s aggression against the Ukrainian State, new, sufficiently appealing opportunities have emerged for Western defense companies. While a persistent lack of funding for homeland defense programs was previously the key hurdle for Ukraine’s partnership with the West, Ukraine is now evolving into a capacious market for defense technology.

This is precisely about the technology, rather than defense products proper, because, given the


availability of extensive domestic defense industrial capabilities, there should be no expectation of any significant procurements of arms and military equipment directly from foreign suppliers. Alternatively, it is to be expected that the prohibitively low level of the State Defense Procurement Order in Ukraine would not roadblock the growth and expansion of military-technical cooperation between Ukraine and defense companies in the West.

Western partners are now guided by the statement made by Ukrainian President, Petro Poroshenko during festivities celebrating the 23rd Anniversary of Ukraine’s independence on 24 August, 2014, wherein he promised the disbursement of about Hr 40B in funding for technical military modernization programs over the next three years. This is the key signal for European countries to launch cooperation with Ukraine, as this implies opportunities for collaborative R&D and co-production programs and for multinational projects aimed to build up Ukraine’s national defense capacity. What inspires more optimism is a follow-on directive issued by Poroshenko on 5 November, ordering an urgent revision of the Draft State Budget 2015 with respect to giving a priority funding status to technical military modernization programs. It envisions, inter alia, an increase in annual national defense spending up to 3% of the GDP, which represents

an almost three-fold growth from the current level. This would enable Ukraine to remedy persistent structural imbalances in its defense budget where the proportion of procurement spending traditionally has not exceeded 5-6% versus up to 30% in advanced and developed countries with continuous and systematic strategies of military technical modernization. This is a strategic objective looked at by the new Ukrainian government.

Technical status of the defense industries in Ukraine might be another contributing factor to defense-industrial cooperation between Ukraine and the West. For example, provisions regarding modernization and retooling of production lines and implementation of incentives for critical technology development in selected areas of specialization could be incorporated into offset agreements accompanying major armaments projects. It is known that, due to ineffective, incompetent military-technical policy, Ukraine is lagging seriously in important technology areas such as microelectronics hardware, microprocessor technology and nanotechnology which are all indispensable components of modern armaments. In this context it should be added that the Ukrainian Government, by its decree dated 24 September, 2014, exempted foreign defense companies from customs duties.

Finally, one more factor favoring Western defense companies is that


the domestic defense industries, even with government’s willingness and determination, will not be able to proceed as fast as needed with the technical military modernization work. That said, the Government would be advised to immediately begin procurements of vital imported AME types such as C4I capabilities and selected types of weapons systems as well as upgraded ex-Soviet military equipment. Regarding strategic priorities of future cooperation, these include the building of a robust air defense infrastructure in Ukraine; production of helicopters, ammunition and unmanned aircraft systems; as well as upgrade of gun systems among other areas.

It might be recalled that Sweden has already stepped up its cooperation in military technology with Ukraine. In October 2014, a team of the Swedish Defense Research Institute visited Kiev to meet and talk with executive officials of the Ukrainian defense industry. At the conclusion of the negotiations the parties agreed to develop bilateral projects in the defense technology industry. Experts believe it probable that Ukraine and Sweden may consider joint ventures for production of technologically complex, sophisticated military systems such as Gripen airplanes, for example.

At the same time, it is urgent that the Ukrainian military-political authorities take the necessary legislative and administrative measures to facilitate the

domestic defense industries’ transition to Western technology. First and foremost, measures need to be taken in order to, first, create conditions so that the defense companies could “play by modern rules”, which implies corporization and organizational restructuring of most of the country’s military production companies, and, second, to establish a list of companies eligible for privatization (with a legislatively determined stake of equity to be privatized) without changing their respective production profiles.

Hurdles that can slow down or impede defense industrial and procurement relations between Ukrainian and Western defense companies are the lack of appropriate and effective legal and regulatory framework for offset contracting in defense and security procurements, as well as prohibitively slow rate of corporatization and privatization of the domestic defense industries, coupled with the rapid aging of production assets. Finally, this is the lack of a single government coordinator of the national defense industry, who could be put in charge of awarding government defense procurement contracts and the procurement of imported military products.

Another potential hazard lies in the fact that Western defense suppliers would sell fully integrated finished solutions rather than the process itself. Considering the size and capabilities


of the Ukrainian defense industry and Ukraine’s standing in the world arms market, a more rational approach would be for Western partners to establish joint ventures and industrial partnerships, create attractive investment and industrial offset opportunities, and give Ukrainian defense industries a workshare in the production of components and subsystems of the AME types slated for induction into the Armed Forces of Ukraine. In the context of the issues referred to above, a more extensive dialogue, both at the official and informal levels, is becoming an extremely vital component of the Ukrainian-Western MTC development policy.

The core areas for strategic investment could include programs to:

make up for the ammunition R&D and production capacities lost as a result of the Russian seizure of Donbas; replace Russian components in radar equipment [produced by Ukrainian “Iskra”]; replace Russian components in military transport aircraft and specialty airplanes [produced by «Antonov»], as well as in helicopters; build new factories in sectors such as unmanned aerial vehicles, C4I and others.

Flexibility and consistency are what the partnering sides need most if their defense industrial and procurement relations are to be effective. The key factors of success thereto are political will and adequate resource support for Ukraine’s national defense capacity.

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Military-Technical Co-operation Between Ukraine and Allied Countries. Potential and Reality