Baltic Journal of Economic Studies  

185

Vol. 10 No. 1, 2024 

This is an Open Access article, distributed under the terms 
of the Creative Commons Attribution CC BY 4.0

1 Central Research Institute of the Armed Forces of Ukraine, Ukraine (corresponding author)
E-mail: military.technology@icloud.com
ORCID: https://orcid.org/0000-0003-3542-5407
2 Central Research Institute of the Armed Forces of Ukraine, Ukraine
E-mail: sergiigodz1968@ukr.net
ORCID: https://orcid.org/0000-0002-7860-2330

DOI: https://doi.org/10.30525/2256-0742/2024-10-1-185-193

MILITARY-ECONOMIC ASPECTS OF MAINTAINING  
THE STATE'S DEFENCE CAPABILITY  

IN THE CURRENT MILITARY AND STRATEGIC SITUATION
Volodymyr Mozharovskyi1, Serhii Hodz2

Abstract. The article outlines the content of one of the main military-economic aspects of maintaining Ukraine's 
defence capability in the current conditions of development of the military-strategic situation – mobilisation 
readiness and capabilities of the State, in particular, the capabilities of its defence-industrial complex to  
create new and modernise existing models of weapons and military equipment, and to produce missiles, 
ammunition and other material and technical means. Given the main contradictions in the development of  
the defence industry of Ukraine, the authors propose, as an option, a system of state management of the defence 
industry of Ukraine, which should be based on the centralisation of strategic functions for its development.  
In particular, it is proposed to create the State Agency for the Defence Industry of Ukraine – a structure with the 
status of a permanent executive body and broad powers to develop and implement the tasks of the defence 
industry. The paper focuses on the importance of protecting economic facilities, and the authors believe that  
one of the ways to improve the effectiveness of defending the country's economic potential is to create an  
additional echelon of non-fire protection for the most important economic facilities, such as energy infrastructure, 
industrial enterprises, ports, airfields, railway stations, etc. It is through the integrated use of active fire  
defence and passive non-fire defence means that the unconditional preservation of the country's economic  
potential can be achieved. At the same time, an analysis of the scientific literature in this area of research shows 
that existing methodologies (methodological approaches) do not provide for a comprehensive approach to 
substantiating ways to address the problematic issues of the state's defence capability, taking into account the  
main military and economic aspects of its maintenance, as well as the peculiarities of the development of 
the military-strategic situation. In view of this, the authors believe that the prospect of further research should 
be to reveal the content of other military-economic aspects of maintaining the state's defence capability in the 
current military-strategic situation, and, with this in mind, to develop a comprehensive methodological approach 
to substantiating ways to address the problematic issues of combat and mobilisation readiness of the Armed 
Forces and the Defence Forces of Ukraine as a whole. The analytical material presented in this article is based on  
the experience gained by the troops (forces) in the course of operations (combat actions).

Keywords: military-economic aspects, defence capability, mobilisation readiness, mobilisation capabilities of  
the state, defence industry, weapons and military equipment.

JEL Classification: H56, H59, N40

1. Introduction
The analysis of the conduct of modern operations 

(combat actions) has revealed a number of  
problematic issues related to maintaining the defence 
capability of Ukraine, first of all, the ability of the  
Armed Forces (AF) and the Defence Forces (DF) 
of Ukraine in general to adequately respond to  
challenges and threats to Ukraine in the military 

sphere. In view of this, military science (its branches) 
is currently facing a number of challenges related  
to the need to address the existing problems of the  
state's defence capability, to find ways to increase the 
combat capability of the Armed Forces of Ukraine, to 
achieve the required level of their combat capability 
and ability to effectively counter the enemy on the 
battlefield. 



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It is also important to take into account that the 

current conditions of development of the military-
strategic situation are characterised by the rapidity of 
operations (combat actions), the growth of capabilities 
of reconnaissance and firepower, the growing role 
of manoeuvre, the safety of use and protection of  
troops (forces) from enemy attacks, and, as a result, 
a significant reduction in the time for decision-making 
and setting tasks for troops (forces). Given these 
features, the role of certain military-economic aspects 
of maintaining defence capability is growing, and, 
above all, the mobilisation readiness and mobilisation 
capabilities of the state, in particular, the capabilities  
of its defence industry complex (DIC) to create new 
and modernise existing models of weapons and military 
equipment (WME), produce missiles, ammunition,  
and other material and technical means (MTM). 

2. Analysis of the Latest Research  
and Publications

An analysis of the scientific literature in this area 
of research shows that the problematic issues of 
maintaining the state's defence capability are reflected 
in a number of scientific publications. For example, 
Dieniezhkin (2019) and Tymkiv (2021) use indicators 
to assess the combat capabilities, combat capability 
and combat composition of formations (units), 
which characterise their manning, provision with 
major types of weapons and equipment, expendable  
material and equipment, and the level of training 
achieved. In (Mozharovskyi, 2018), the assessment of 
the combat capability of formations (units) is carried 
out taking into account the contribution of units  
of the branches of the armed forces to their combat 
capability. The main indicator is the provision of 
units with standard models of WME. The current 
level of combat capability, combat capabilities and 
optimal combat composition of formations (units) 
are determined in accordance with the indicators of 
prevented damage to the troops in the operation and 
taking into account resource constraints. Sakovskyi 
(2020) uses methods to justify the division of the  
Armed Forces of Ukraine into units of permanent 
readiness and those subject to mobilisation, which  
allow optimising such a division depending on the 
selected criteria, namely, the time constraints for 
bringing units into combat readiness and the financial 
resources allocated for this purpose. Heorhadze and 
Kharabara (2020) outline a methodological approach 
to assessing the level of training of the state DF. Hodz 
(2023) outlines the methodological foundations for 
the formation of Comprehensive Combat Training 
Programmes for the units of the state's DF. There 
are a number of studies, in particular (Zaluzhnyi, 
Zabrodskyi; Experience of the Defence Forces of 
Ukraine in conducting defence operations (combat 

operations)), which take into account the experience  
of conducting combat operations in the context of 
repelling Russia's armed aggression against Ukraine. 
These works are important for further study of the 
issues of combat capability, combat and mobilisation 
readiness of the AF, their ability to adequately 
respond to challenges and threats to Ukraine in the 
military sphere. At the same time, the above methods 
(methodological approaches) do not provide for 
a comprehensive approach to substantiating ways 
to solve problematic issues of the state's defence  
capability, taking into account the main military 
and economic aspects of its maintenance, as well as  
the peculiarities of the development of the military-
strategic situation.

The purpose of the article is to outline the content 
of one of the main military-economic aspects of 
maintaining Ukraine's defence capability in the  
current military-strategic situation – mobilisation 
readiness and mobilisation capabilities of the State, 
in particular, the ability of its DIC to create new and 
modernise existing models of WME, produce missiles, 
ammunition and other MTM.

3. Presentation of the Main Research Material
The mobilisation readiness and mobilisation 

capabilities of the state, including the ability of its  
DIC to create new and modernise existing models 
of WME, produce missiles, ammunition and other 
MTM, is one of the key military and economic 
aspects of maintaining the state's defence capability in 
the current military and strategic situation. This and 
other aspects shown in Figure 1, military-economic 
aspects are interconnected with the well-known 
principles of military art and with the functions 
of troops (forces) in operations (Mozharovskyi,  
Hodz, 2022).

In a general sense, mobilisation readiness is a state 
(indicator) that determines the degree of readiness of 
the country's troops (forces), economy and population 
for the transition from peacetime to martial law. The 
mobilisation readiness of the Armed Forces depends 
on the staffing structure of formations (units),  
location, manning, equipment and personnel, the 
intensity of their mobilisation, and a number of other 
factors, and is assessed by the time required to switch  
to wartime staffing and the mode of operation in  
wartime. Of great importance for ensuring the 
mobilisation readiness of the state are its mobilisation 
capabilities – human and material resources that can 
be used by the state to meet the needs of the front and 
rear during the war. Thus, the components of material 
resources include the production capabilities of all 
sectors of the national economy, stocks of strategic  
raw materials, energy and financial resources. The basis 
of the state's mobilisation capabilities is its economy, 



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primarily heavy industry and engineering, energy 
and transport. It is these sectors of the economy that 
determine the DIC capabilities, and thus directly affect 
the state's defence capability.

It should be noted that the DIC of Ukraine is a set of 
public administration bodies, enterprises, institutions 
and organisations of industry and science that  
develop, produce, modernise and dispose of military 
products, provide services in the interests of defence 
to equip and provide material support to the Security 
and Defence Forces, as well as supply military and 
dual-use goods and military services in the course 
of military-technical cooperation between Ukraine 
and other states (The Law of Ukraine "On National  
Security of Ukraine"). However, the development of 
Ukraine's defence industry faces a number of challenges. 

The Ukrainian defence industry as a single 
conglomerate has not existed since Ukraine gained 
independence. After the collapse of the USSR,  
Ukraine was left with only a fragment of the USSR's 
defence industry, which was unbalanced and  
unsuitable for providing technical equipment to the 
Ukrainian Armed Forces. Further development of 

the Ukrainian DIC was based on the old post-Soviet 
model. This model was no longer effective in the new 
military-strategic environment, and therefore unable  
to adequately respond to the challenges and threats 
to the state's security in the military sphere and to the 
needs of the AFU. Ukraine's DIC was characterised 
by a high level of dependence on budget funding, 
insufficient transparency, and low financial and 
executive responsibility of business entities. 

The imbalance in Ukraine's military-technical 
and defence-industrial policy and the lack of 
practical experience in defence governance have 
led to a fragmentation of defence structures 
between different ministries and agencies, which 
has resulted in uncoordinated decision-making and 
a lack of accountability for their implementation.  
The consequence of this policy in the defence industry  
was the destruction of powerful production, scientific  
and technical complexes and the formation of 
scattered small business entities. The formation of  
the national defence industry on a territorial basis  
led to the fragmented nature of Ukraine's defence 
potential, where only 8% of the total range of defence 

Mobilisation readiness and mobilisation capabilities of the state, in 
particular, the capabilities of its DIC to create new and modernise 
existing models of WME, production of missiles, ammunition, and 

other MTM

Cost indicators of maintenance 
and equipment of joints (units)

Protection of 
economic assets

Degree of development of 
science, technology and 

engineering

Military and economic aspects of maintaining the state's defence capability 
in the current military and strategic situation 

Principles of the art of war

Concentration of efforts

Flexibility

Readiness 

Initiative

Suddenness

Simplicity Power efficiency

Unity of effort

Movement (manoeuvre) of troops (forces) 

Leadership and 
management 

Information activities

Functions of troops (forces) in operations

Fire impact Exploration

Security of the use 
of troops (forces) 

Protection Support 
Support (logistical, medical, moral and 

psychological, medical, financial) 

Maintenance of 
morale

OffensivenessFreedom of actionSecurity

Macroeconomic indicators of the state and development of 
the state's economy for a certain period, forecast of the 

dynamics of changes in its military budget

State of military infrastructure, 
transport capabilities of the 

state

Commitment 

Figure 1. Interconnection of military-economic aspects of maintaining the state's defence capability in the current conditions of 
development of the military-strategic situation, principles of military art and functions of troops (forces) in operations



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products was produced in a closed cycle (Ukraine-
NATO: the potential for defence cooperation). 

In fact, until 2014, the problems of the Ukrainian  
DIC were not resolved. Most enterprises were in  
crisis, due to the lack of state defence orders,  
significant depreciation of fixed assets (60-80%),  
excess production capacity, an unbalanced DIC  
structure, and a lack of innovation at most facilities.  
The number of defence companies, the number 
of people employed at defence companies, and  
production volumes have all fallen significantly. The 
state has failed to ensure effective restructuring of  
such defence industry giants as Malyshev Factory, 
Joint Stock Company "Aviation and Rocket  
Technology Manufacture", Pivdenmash, PJSC  
SJSHC TOPAZ, LLC DP KVANT, SE Generator  
and others (Bohdanov, 2009).

For thirty years, Ukraine's defence industry has 
not been able to reach the technological levels of  
developed countries. Ukraine's military-technical 
policy was mainly export-oriented. Only 5-8% of the 
production of the potential capabilities of defence 
enterprises was used to equip the Armed Forces of 
Ukraine, while the rest was exported (Horbulin,  
2019). DIC enterprises had to be modernised or  
new ones created through technology transfer 
from partner countries. As before, most defence  
companies whose products were still in demand on 
the international market survived solely on export 
orders. However, this demand was mainly driven by 
the favourable cost of the WME for the consumer.  
This made it unnecessary for manufacturers to 
modernise or develop the latest models of WME. In 
addition, the development of the DIC was hampered 
by the lack of interest from the main customers of 
DIC products due to chronic underfunding. This 
state of affairs led to a significant number of DIC 
enterprises gradually slipping into debt. Almost all  
DIC enterprises had common features: the ability 
to produce only outdated products, lack of funds 
for the latest developments, an old technological 
base, huge unused areas under maintenance, and  
inefficient management. 

The only way out of this situation was considered 
to be a defence order from the state. However, later 
it became apparent that the implementation of a  
defence order is problematic even if there is a certain 
financial resource. The reason for this was the limited 
production capabilities of DIC enterprises to fulfil 
defence contracts in a timely and high-quality  
manner, primarily due to the lack of new high-tech 
equipment and replacement of outdated models,  
as well as a shortage of highly qualified personnel.  
As of the end of 2021, the management system of 
the domestic DIC had not yet achieved sustainable 
development (Government portal). Other common 
problems included the inconsistency of military-

industrial and military-technical policies; lack of 
effective regulation of intellectual property issues; 
suboptimal defence procurement processes, etc.

The full-scale armed aggression against Ukraine by 
the Russian Federation (RF) had a significant impact 
on the functioning of the national DIC. With the 
aim of destroying Ukraine's military and military- 
industrial potential, the Russian armed forces 
launched powerful missile and bomb attacks on  
DIC enterprises, causing significant damage and 
disrupting their operations. The main problems 
associated with Russia's aggression include a decrease 
in the production capacity of defence companies; 
capital outflows and freezing of investment projects; 
logistics problems, including the destruction 
of cooperation ties and supply chains for raw 
materials, components, and materials. All of this has  
exacerbated the existing problems with supplying 
DIC enterprises with elements that are not produced 
in Ukraine and are supplied from abroad, such 
as microelectronics, as well as the necessary raw  
materials. The defence industry almost completely 
stopped exporting finished products, components, 
military and dual-use units and assemblies.  
A significant outflow of human resources (skilled 
workers) due to forced emigration abroad and  
internal migration of the population became a  
problem. There has been a change in the balance of  
labour by region, which has led to a mismatch  
between the location of the DIC's production  
facilities. A significant problem was the virtual  
absence of a scientific, technical, production and 
technological base for the creation and production 
of combat aircraft (aircraft, helicopters), air/missile 
and aerospace defence systems, as well as ammunition  
of various calibres. There is an urgent need to  
produce and stockpile missiles and ammunition. 

In 2022–2023, compared to the pre-war period, 
the need to finance the defence sector increased 
significantly. In this regard, the state began investing 
in the purchase of new types of weapons and military 
equipment for the Armed Forces of Ukraine and the 
development of new weapons. Although the state 
defence order increased slightly, it did not increase 
dramatically. At the same time as state customers 
are increasing their orders for WME, there is an  
insufficient level of readiness of the production and 
repair facilities of DIC enterprises to quickly meet  
the needs of the AF and restore defective and  
damaged WME as a result of hostilities. All this is 
complicated by the rapid transition of the Armed  
Forces from Soviet-made weapons to foreign-made 
weapons. At the same time, the ability of defence 
industry enterprises to repair predominantly Soviet-
made weapons remains a problem. 

Due to the limited capabilities of the state-owned 
defence industry and the fact that most state-owned 



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defence companies depend on subsidies from the  
state budget, it became necessary to order certain 
types of weapons from private defence companies,  
and therefore, a significant part of the state defence  
order is currently fulfilled by the private defence 
industry. Some of these products do have good 
characteristics, but it is not uncommon for the AF to  
be forced to use private sector products, despite 
their poor performance, solely because of the lack of 
alternative models. 

Another negative factor is that Ukraine has no 
experience of state support for the private sector of 
DIC enterprises, production of dual-use products,  
and conversion of civilian infrastructure and  
enterprises to war needs under martial law. Only  
some elements of such a system have been created  
to replace the Soviet-style system. Therefore, in this 
special period, the question arose as to whether it 
is advisable to expand the private sector market in 
the DIC to create a competitive environment, as  
the opening of such a market could lead to an even  
greater deterioration in the state-owned defence 
enterprises, which are not always flexible in  
responding to demand for certain types of WME. 
Practice shows that without powerful state-owned 
enterprises, Ukraine's DIC will have limited  
capabilities to produce tanks and aircraft, which  
may not be the best world models, but have certain 
unique characteristics, and therefore the loss of the 
potential of these enterprises will be a significant  
setback for the state. 

The experience of warfare confirms that it is the  
WME produced by state-owned defence enterprises  
that are currently the most technically advanced  
and reliable, and therefore the most effective in 
a combat situation. Thus, there is now a need for 
systemic reform of the state-owned defence sector.  
To achieve this, it is necessary to create conditions  
under which state-owned enterprises can attract 
the necessary investments and introduce new  
technologies. The share of the private sector in the 
defence industry should be clearly regulated, regulated  
and controlled in terms of the quality of products.

One of the reasons for the slow implementation 
of reforms in the public sector of Ukraine's defence 
industry is the problems with the development of 
Ukroboronprom, which since 28 June 2023 has 
become the Joint Stock Company Ukrainian Defence 
Industry, a strategic manufacturer of weapons and 
military equipment in Ukraine that unites state-
owned multidisciplinary unitary enterprises of  
various strategic sectors of the DIC. The company 
is a national leader in the production of military  
equipment and an integral part of Ukraine's defence 
and security sector. For this reason, according to 
the military and political leadership of the state, the 
strategic importance of the enterprises of the Joint 

Stock Company Ukrainian Defence Industry requires 
ensuring their effective and sustainable development. 
There have been some positive developments in this 
area. For example, the Ukrainian Armour was able to 
fully resume production of mortars and supply the  
AF with a significant number of artillery systems 
of various calibres in 2023 alone. Some progress is 
being made in the implementation of the missile,  
ammunition and combat drone programmes. 

One of the top priorities for the defence industry is 
the production of unmanned aerial vehicles (UAVs). 
To this end, in 2022, the Army of Drones project was 
launched, a comprehensive programme that includes 
the systematic purchase of drones, their repair and  
rapid replacement, and pilot training. While this  
initiative was initially implemented with the help 
of donor funds, in 2023, the state budget provided 
significant funding. As a result, in 2023 (compared 
to 2022), the production of UAVs in some categories 
increased tenfold. Today, there are dozens of  
companies producing UAVs on the market. Certain 
models of Ukrainian drones have passed the 
commissioning procedure and are now receiving 
government contracts. To create the necessary 
conditions for UAV production, a number of  
restrictions have been removed: VAT and import  
duties on UAV components have been cancelled,  
and access to their operation has been simplified.  
Today, the needs of the troops (forces) for recon-
naissance UAVs of the fixed-wing and multi-rotor  
types are almost met. For example, according to  
military experts, the production of FPV strike 
UAVs (multi-rotor strike UAVs with the function of 
transmitting real-time video from the UAV's camera) 
should be the largest and fully meet the needs of  
tactical units. The Ministry of Digital Transformation 
has launched the next stage of training for a large 
number of UAV operators. Importantly, in the draft 
state budget for 2024, the government has provided  
for a significant increase in funding for the  
production of domestic UAVs. At the same time,  
it should be borne in mind that the production of  
UAVs alone will not eliminate the problem of the 
firepower of the troops (forces). The development 
of domestic rocketry, especially the introduction of 
medium- and long-range missile systems, remains 
extremely important.

During the war, the management of JSC Ukrainian 
Defence Industry faced three main tasks: to 
increase the production of ammunition and military  
equipment, build an effective anti-corruption 
infrastructure in the company, and transform the 
JSC. These are important steps to implement positive 
changes in domestic defence production, which 
will strengthen the defence industry, significantly  
increase production volumes and rates, and, as a  
result, make it the engine of economic recovery.



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The experience of military conflicts in recent 

years shows that today and in the future it will be  
impossible to win a war on the whole by means of 
defensive and offensive actions alone, even if they 
are highly effective. Today, not only and not so much 
ground forces are needed as a large number of high-
precision unmanned aerial vehicles of various ranges 
and purposes, and weapons based on new physical 
principles. It can be predicted that strategic non- 
nuclear forces will play a significant role in the wars 
of the future, gradually replacing the current strategic 
nuclear forces. The basis of the non-nuclear forces  
will be UAVs and precision cruise missiles of long, 
medium and short range, which will be carried by 
the Army, Air Force and Navy. This trend is observed  
today in the context of repulsing Russia's armed 
aggression against Ukraine and in the Middle East 
(Israel, Palestine).

It should be noted that the structural restructuring  
of the defence industry involves reforming and 
developing its management system in line with 
the best international practices. Primarily, the  
management system of the defence industry 
should be as flexible as possible, able to respond in 
a timely manner to challenges and threats to the state's  
security in the military sphere, and able to adapt to 
the needs of the state's defence and global commodity 
markets. The development of the defence industry 
management system should comply with the 
principle of ensuring a single technological cycle of  
development, production, sale and after-sales service  
of high-tech products and the need to concentrate 
scientific, technical and technological potential 
on priority areas of development of weapons and 
military equipment, new technologies and dual-use 
technologies, based on the market strategy, economic  
feasibility, taking into account the specifics of defence 
technologies and areas of their implementation. 

A clear definition of the place and role of the  
subjects of the defence industry governance system  
is essential for the development of the defence  
industry system. However, today, the defence industry 
operates in an environment of almost complete 
absence of targeted state influence on its development, 
primarily on relations between the branches of 
government regarding the redistribution of financial 
flows and assets of the defence industry. As a result, 
the dispersion of defence enterprises across different 
ministries and agencies leads to duplication of key 
functions, inconsistency in the formation of state 
defence orders (SDO) and lack of responsibility for 
their implementation.

Table 1 provides a list of functions performed by 
different ministries and agencies. The differentiation 
of these functions by different structures gives rise 
to problematic issues that systematically arise, in  
particular in the following areas: the formation and 
distribution of SDO; the lack of stable relations 
with manufacturers when determining prices and 
commissions for arms exports; the emergence of 
unjustified competition between Ukrainian special 
exporters in foreign markets, etc. Currently, the  
criterion for institutional reforms in the defence  
industry is the subjective approaches of the 
governing authorities to the distribution of financing 
functions among different structures and the 
unjustified differentiation of financial flows between 
trade intermediaries, management structures and 
manufacturers. The lack of rules for the economic 
behaviour of business entities in the DIC leads to  
the formation of spontaneous schemes for the 
distribution of financial resources, and contradictions 
between the branches of government regarding the 
redistribution of financial flows and assets of the  
DIC lead to an imbalance in the development of  
the DIC as a whole. 

Table 1
DIC functions performed in different departmental structures

№ Structure name DIC function

1.
The Ministry of Strategic Industries 
of Ukraine, to which they are 
subordinated:

Ensuring military-technical cooperation, formation and execution of defence orders

1.1 JSC Ukrainian Defence Industry
Strategic manufacturer of weapons and military equipment, uniting state-owned 
multidisciplinary unitary enterprises of various strategic sectors of Ukraine's defence industry. 
Formation, approval and placement of SDOs

1.2 Ukrspecexport Export of products and services for military and special purpose products and services
1.3 Specialist exporters Export of own products and services

1.4 TASKO Corporation Development and manufacture of explosives, gunpowder, ammunition, artillery and small 
arms, electronic and optical fire control systems. Formation, approval and placement of SDOs

1.5 SSAU Export of space products, military-technical cooperation

2. Ministry of Defence of Ukraine Formation and coordination of key indicators of SDO, ensuring military-technical 
cooperation

3. Ministry of Economy of Ukraine Formation of the draft SDO key indicators, coordination of activities of state customers, 
ensuring military-technical cooperation



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Attempts to reform the system of public adminis-
tration of the Ukrainian defence industry already have 
a certain history (Horbulin, Zubariev, Tymchenko, 
2009; Yefetova, Baranovska, 2011). Taking into  
account the previous experience of reforming and 
developing the DIC, and taking into account the  
main contradictions that have developed in the  
relations between the state and defence enterprises, 
Figure 2 shows (proposed by the authors) a variant of 
the system of state management of the Ukrainian DIC.

The proposed system should be based on the 
centralisation of strategic functions for the develop-
ment of the defence industry. In particular, it is  
proposed to create a State Agency (SA) of the Defence 
Industry of Ukraine – a structure with the status of 
a permanent executive body with broad powers to 
develop and implement the tasks of the defence industry.

The main functions of the proposed structure  
should be: development of defence and industrial 
policy and setting priorities for its implementation; 
identification of the main trends in the export of  
weapons and military equipment and formation of 
an appropriate export policy to take into account the 

strategic interests of the state and the problems of the 
manufacturer; effective use of offset agreements for 
the innovative development of certain sectors of the 
defence industry; centralisation of the functions of 
forming and placing SDOs and introduction of an  
effective monitoring system for their implementation; 
introduction of appropriate methodological support 
based on the development of alternative options 
for implementing measures in conditions of low 
predictability of results and high risks, determining 
the necessary concentration of budget funds and 
creating conditions for attracting other means of 
financing. A prerequisite for the effective functioning  
of the SA of the Defence Industry of Ukraine should 
be the formation of a military-technical policy on 
the creation of new generations of weapons and 
improvement of tactical and technical characteristics 
of existing WME systems on the basis of centralisation 
of relevant functions in the Interagency Commission 
on Military-Technical Policy, Military-Technical 
Cooperation (MTC) and Export Control with the  
status of a permanent body subordinated to the  
President of Ukraine. A comprehensive approach to 

Defence industrial policy; formation and deployment of SDOs;  ensuring military-technical cooperation 

President of Ukraine

Ministry of 
Defence of 

Ukraine

Prime Minister of Ukraine

Vice Prime Minister, Head of the 
Defence Intelligence of Ukraine

State Agency of the Defence Industry of 
Ukraine 

Interagency Commission on Military-
Technical Policy, Military-Technical 

Cooperation and Export Control

Formation and 
coordination of key 

SDO indicators; 
ensuring military-

technical cooperation 

Approval of the SDO.
Formation of the draft SDO key indicators; coordination of 

activities of state customers; ensuring military-technical 
cooperation

WME and services exports

State Space 
Agency of 
Ukraine

Ukrspecexp
ort Ministry of 

Strategic 
Industries of 

Ukraine

JSC Ukrainian 
Defence Industry

Strategic manufacturer of weapons and 
military equipment, uniting state-owned 
multidisciplinary unitary enterprises of 
various strategic sectors of Ukraine's 

defence industry.

Formation, approval and placement of 
SDOs.

Ministry of 
Economy of 

Ukraine

TASKO 
Corporation

Development and manufacture of explosives, gunpowder, ammunition, artillery and small arms, electronic and 
optical fire control systems. Formation, approval and placement of SDOs

 Figure 2. The system of state management of the Ukrainian defence industry (option)



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solving these problems will help to ensure that state 
interests are taken into account when formulating  
defence and industrial policy, that priorities are 
reasonably set at all levels of defence industry 
development, that appropriate resources are 
concentrated for their implementation, and that 
strategic and defence planning in the military sphere 
function in a coordinated manner.

It is the reformed state-owned sector of Ukraine's 
defence industry, whose enterprises meet modern 
management and development requirements, that 
is the basis for building up the combat capability, 
combat capabilities and combat potential of the 
AFU. The development of the national DIC has been 
and remains a priority for the military and political 
leadership of Ukraine. As the Commander-in-Chief 
of the AFU emphasises, the development of the 
national defence industry is the basis for increasing the  
combat potential, combat capability and combat 
capabilities of formations (units), as well as the 
groupings of troops (forces) created on their basis 
(Zaluzhnyi, Zabrodskyi). The development of 
the defence industry is the basis for strengthening  
Ukraine's economic potential. This will determine 
whether Ukraine will find its place among other 
countries producing modern and effective weapons. 

In the current military-strategic environment, the 
protection of economic assets is of great importance. 
Practice shows that no matter how effective an Air 
Defence System (ADS) is, it cannot fully protect  
against damage and preserve the country's economic 
potential, which, as the experience of warfare shows,  
is and will remain the main target of the enemy.  
Therefore, one way to increase the effectiveness of 
defending the country's economic potential is to 
create an additional echelon of non-fire defence of  
the most important economic facilities, such as  
energy infrastructure, industrial enterprises, ports, 
airfields, railway stations, etc. The echelon of  

protection of economic (infrastructure) objects may 
include engineering and special camouflage means, 
imitators of objects and their critical elements, means  
of changing the contrast of the surrounding  
background, chemical smoke discharge means,  
aerosols, electronic protection, etc. The practical 
implementation of these protection measures should 
ensure that the failure of individual elements of 
a particular economic entity should not affect the 
functioning of the entity as a whole. Responsibility 
for the implementation of these protection measures  
should be assigned directly to each manager of 
the relevant enterprise, institution, organisation  
(industry) of the economy (DIC). All activities  
should be carried out as part of a set of territorial 
defence measures. It is through the integrated use  
of active fire defence and passive non-fire defence 
that the unconditional preservation of the country's 
economic potential can be achieved. 

4. Conclusions
The publication outlines the content of one of 

the main military-economic aspects of maintaining 
Ukraine's defence capability in the current military-
strategic situation, namely, the mobilisation readiness 
and mobilisation capabilities of the state, in particular, 
the ability of its DIC to create new and modernise  
existing models of WME, produce missiles, ammu-
nition and other MTM.

The authors believe that the prospect of further 
research should be to reveal the content of other  
military-economic aspects of maintaining the 
state's defence capability in the current military-
strategic situation, and, with this in mind, to develop 
a comprehensive methodological approach to sub-
stantiating ways to address the problematic issues 
of combat and mobilisation readiness of the Armed  
Forces and the Defence Forces of Ukraine as a whole.

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Received on: 10th of February, 2024
Accepted on: 16th of March, 2024
Published on: 05th of April, 2024