How Ukraine’s Defence Industry Sold Itself Out

The ongoing Ukraine-Russia war that started in 2022 has highlighted Ukraine’s weakened defence industry, with most of its weapon factories destroyed by Russian forces. Additionally, power shortages caused by targeted bombings of power stations have further crippled the remaining factories, limiting Ukraine’s ability to sustain and repair its defence capabilities. What factors led to the collapse of Ukraine’s defence industry in such a brief time? Let’s explore this issue in greater detail.

To say that Ukraine’s descent into military and strategic dependency on the West has been a tale of spectacular mismanagement is an understatement. Following its independence in 1991, Ukraine inherited one of the largest military stockpiles in the world—enough weapons to dominate Eastern Europe if used wisely. But instead of cementing its place as a formidable Eastern European power, Ukraine’s military-industrial history since then has been a story filled with corruption, black-market dealings, and botched reforms. A comedy of errors? More like a tragedy with a punchline—the joke being that the only thing that can save Ukraine now is the mercy of Western allies.

To grasp Ukraine’s defence industry’s decline, it’s worth noting how Western interests reshaped it to the point of near dependence. After inheriting a hefty defence setup from the Soviet era, Ukraine was a prime arms player. But Western meddling—from political boosts during the Orange Revolution to the Euromaidan—nudged Ukraine from Russian orbit, sparking internal divisions. Add a side of corruption and economic “assistance” with strings attached, and Ukraine’s defence autonomy dwindled.

Ukraine’s arms industry saw a remarkable, if ethically dubious, rise in the 1990s. The industry expanded tenfold from 1997 to 2000, exporting a whopping $1.5 billion in legal weapons trade. This was not enough, apparently, as the illegal arms trade thrived alongside it. Ukrainian arms quickly found their way into conflict zones from Africa to the Middle East, ending up in the hands of regimes like Saddam Hussein’s in Iraq. Between 1992 and 1998 alone, a stunning $32 billion worth of Ukrainian military assets simply “went missing.” Official records suggest that much of this was stolen, siphoned off by high-ranking officials and corrupt military personnel, some of whom sold entire military installations. Forged end-user certificates helped these dodgy deals, allowing Ukrainian arms to travel through official channels, often with little to no scrutiny. The illegal market was as lucrative as it was booming, with arms turning up everywhere from Sierra Leone to the Taliban-controlled regions of Afghanistan.

Perhaps no one illustrates Ukraine’s shady dealings more than arms smuggler Leonid Minin. When Italian authorities arrested Minin, the world got a rare glimpse into Ukraine’s tangled web of illicit weapons, high-level corruption, and organized crime. He was far from an isolated case; he was merely one piece of a larger network cantered in Ukraine, complete with forged paperwork and cooperation from Ukrainian officials either too complicit or too incompetent to stop it. According to Human Rights Watch’s 1999 report on Eastern European arms dealing, export-control authorities were either looking the other way or actively enabling these sales. As if this rampant lawlessness weren’t enough, responsibility for these backroom deals allegedly reached as high as government leadership.

And while accusations of high-level corruption flew, there were concrete figures to back them up. Pavel Lazarenko, who served as prime minister, was implicated in the grandest of thefts, allegedly embezzling $700 million from government coffers. He eventually fled to the United States, where he was arrested on fraud and money laundering charges, becoming a national emblem of greed. Yet the rot didn’t stop there; then-President Leonid Kuchma was accused of sanctioning arms deals with underworld figures, with allegations that implicated him in journalist disappearances and even assassinations. The so-called “Kuchmagate” scandal reached absurd levels when secret recordings surfaced, allegedly showing Kuchma discussing a $100 million missile deal with Iraq, a blatant violation of the U.N. embargo. One official involved in this scandal met a mysterious end in a car crash, a fact many took as less of a coincidence and more of a convenient “accident.”

While Ukraine’s murky dealings went global, the country’s military potential eroded from within. Ukraine had inherited the third-largest nuclear arsenal in the world, with 1,900 strategic warheads, 176 intercontinental ballistic missiles (ICBMs), and 44 strategic bombers. Yet by 1996, Ukraine had returned all its nuclear warheads to Russia, following the Lisbon Protocol, signing the Non-proliferation Treaty (NPT), and receiving hollow security assurances. Without even the capability to deter its neighbours, Ukraine’s decision to denuclearize—a move once hailed as diplomatic prudence—now seemed foolhardy. This arsenal, which could have secured Ukraine’s independence indefinitely, was dismantled with the understanding that the world would honour Ukrainian sovereignty—a promise that, in hindsight, rings as empty as Ukraine’s former missile silos.

At its peak, Ukraine’s defence industry included over 700 enterprises and an impressive arsenal of Soviet-era ability. Names like Antonov, Pivdenne, and Motor Sich once commanded respect as Soviet production powerhouses. Pivdenne, for instance, was the heart of Soviet intercontinental missile production; Antonov managed the creation of the world’s largest planes, the An-225 Mriya. Yet these industry giants began a steady decline almost at once after Ukraine’s independence, as systemic corruption infiltrated every level of management and drained resources away from maintenance and modernization.

The industry also faced a brain drain. Key institutions like the Yuzhmash plant in Dnipro, which produced ballistic missiles like the SS-18 Satan, experienced severe workforce depletion as top engineers and technicians fled to more lucrative opportunities in the west. This “brain drain” left Ukraine’s defence sector with aging experts but few new minds to continue development. Many remaining assets—such as the Zaporizhzhia, Ukraine’s only submarine—fell into disrepair due to inadequate funds. To underscore the tragic state of military maintenance, the 2002 Sknyliv air show disaster saw a Su-27 fighter jet crash into the crowd, killing 77 people. Investigators pointed to lack of pilot training and poor maintenance as contributing factors, painting a grim picture of a defence sector crumbling from within.

Ukraine’s arms industry had opportunities for reform but often squandered them in a tragicomic fashion. One of the most famous incidents was the Kolchuga radar scandal in 2002, when Ukraine was accused of trying to sell advanced radar systems to Iraq, despite the UN sanctions. Even when the defence sector made some progress, it seemed undermined by rampant corruption. Take, for example, the 2019 scandal involving Ukroboronprom, the state defence conglomerate, where it was discovered that officials had been smuggling parts from Russia and inflating contract prices to line their own pockets. This corruption scandal not only drained resources but also embarrassed Ukraine’s already frail defence industry.

Innovation and maintenance budgets became laughably inadequate, leaving the armed forces without any ability to modernize. The Kharkiv Morozov Machine Building Design Bureau, tasked with developing the T-84 Oplot tank, struggled due to a lack of funding and quality control issues. The delays became so dire that in 2013, Iraq rejected a shipment of BTR-4 armoured vehicles from Ukraine due to hull cracks, an embarrassment that underscored the decay of Ukraine’s once-mighty industry.

Efforts to curb corruption seemed equally absurd. Despite adopting the Strategic Defence Bulletin in 2016 and setting up anti-corruption agencies like the National Anti-Corruption Bureau (NABU), entrenched interests continued to obstruct genuine reform. While agencies like NABU tackled some cases, they barely scratched the surface of a system so riddled with graft that even NATO-aligned reforms struggled to gain traction. The notorious 2019 Ukroboronprom scandal served as a reminder that even after decades, old habits die hard.

The full impact of Ukraine’s defence collapse became clear during the Crimean annexation in 2014. With no nuclear deterrent and a military crippled by corruption, Ukraine was in no position to resist. The Battle of Ilovaisk in 2014 was particularly humiliating; many soldiers lacked even basic bulletproof vests, some resorting to buying their own protective gear. Much of Ukraine’s weaponry, like the T-64 tanks and MiG-29 jets, was non-operational, left to rust in storage. This national helplessness starkly exposed the failure to modernize and keep the once-imposing arsenal.

It is become clear that in today’s geopolitical chessboard, Ukraine is largely a pawn, reliant on foreign aid. The Neptune missile, developed by the Luch Design Bureau, was a rare success in domestic defence efforts, proving Ukraine’s R&D potential when adequately funded. However, the heavy reliance on Western military support in a war against Russia, like Javelin anti-tank missiles and Bayraktar drones from Turkey, highlights an uncomfortable reality: Ukraine’s strategic sovereignty is now limited by its dependency on Western powers.

Ukraine’s fall from being a Soviet defence powerhouse to a strategically vulnerable state is a testament to how corruption, mismanagement, and a lack of foresight can reduce even the most formidable arsenals to ineffectual scrap. Decades of systemic issues left Ukraine not only militarily weakened but also strategically dependent, reliant on the very alliances it once viewed with caution.

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Rajeev Ahmed
The Editor of Geopolits.com and the Author of the book titled Bengal Nexus